Question
In: Finance
Currently, Warren Industries can sell 10 dash year , $1,000 -par-value bonds paying annual interest at...
Currently, Warren Industries can sell 10 dash year , $1,000 -par-value bonds paying annual interest at a 14% coupon rate. Because current market rates for similar bonds are just under 14%, Warren can sell its bonds for $980 each; Warren will incur flotation costs of $20 per bond. The firm is in the 25 % tax bracket.
a. Find the net proceeds from the sale of the bond, Nd .
b. Calculate the bond's yield to maturity (YTM) to estimate the before-tax and after-tax costs of debt.
c. Use the approximation formula to estimate the before-tax and after-tax costs of debt.
Solutions
jeff jeffy answered 10 months agoRelated Solutions
Currently, Warren Industries can sell 20 dash year, $1000-par-value bonds paying annual interest at a 13%...
Currently, Warren Industries can sell 20 dash year,
$1000-par-value bonds paying annual interest at a 13% coupon
rate. Because current market rates for similar bonds are just under
13%, Warren can sell its bonds for $960 each; Warren will incur
flotation costs of $35 per bond. The firm is in the 22% tax
bracket.
a. Find the net proceeds from the sale of the bond, Upper N
Subscript d.
b. Calculate the bond's yield to maturity (YTM) to estimate
the...
Currently, Warren Industries can sell 15-year, $1000-par-value bonds paying annual interest at a 11% coupon rate....
Currently, Warren Industries can sell 15-year,
$1000-par-value bonds paying annual interest at a 11% coupon
rate. Because current market rates for similar bonds are just under
11%, Warren can sell its bonds for $960each; Warren will incur
flotation costs of $30per bond. The firm is in the 29% tax
bracket.
a. Find the net proceeds from the sale of the bond,Upper N
Subscript d.
b. Calculate the bond's yield to maturity (YTM) to estimate
the before-tax and after-tax costs of...
Garden Industries can sell 15-year, $1,000 par value bonds paying annual interest at a 12% coupon...
Garden Industries can sell 15-year, $1,000 par value bonds
paying annual interest at a 12% coupon rate. The bonds can be sold
for $1010 each, flotation costs of $25 per bond. The firm is in the
40% tax bracket.
a. Find the net proceeds from sale of the bond Nd
b. Calculate the before-tax and after-tax costs of debt.
Stark Industries wants to sell 15-year bonds that pay interest annually. The par value of bonds...
Stark Industries wants to sell 15-year bonds that pay interest
annually. The par value of bonds will be at $1,000. Stark
Industries stock is selling for $45 per share, and each bond issued
will have 50 warrants attached to it. Each warrant is exercisable
into one share of stock at an exercise price of $50. Stark
Industries straight bonds yield 10%. Each warrant is expected to
have a market value of $4.00 given that the stock sells for $45. In...
Calculate the value of a $1,000-par-value bond paying quarterly interest at an annual coupon interest rate...
Calculate the value of a $1,000-par-value bond paying
quarterly interest at an annual coupon
interest rate of 8% and having 15 years until maturity if the
required return on similar-risk bonds is currently a 16% annual
rate paid quarterly.
A firm’s bonds currently sell for $1,180 and have a par value of $1,000. They pay a...
A firm’s bonds currently sell for $1,180 and have a par value of
$1,000. They pay a $105 annual coupon and have a 15-year
maturity, but they can be called in 5 years at
$1,100. What is their yield to call (YTC)?
The 12-year, $1,000 par value bonds of Waco Industries pay 12percent interest annually. The market...
The 12-year, $1,000 par value bonds of Waco Industries pay 12
percent interest annually. The market price of the bond is
$1,135, and the market's required yield to maturity on a
comparable-risk bond is 9 percent. Compute the bond's yield to
maturity.1. Determine the value of the bond to you given the market's
required yield to maturity on a comparable-risk bond.
Matthew Company issued 10-year, 7% bonds (paying semiannual interest) with a par value of $100,000. The...
Matthew Company issued 10-year, 7% bonds (paying semiannual
interest) with a par value of $100,000. The market rate of interest
when the bonds were issued was 6%. Compute the price of the bonds
when they were issued. **How do i answer this NOT using a financial
calculator**
Tiling Corporation’s bonds pay $110 in annual interest, with a $1,000 par value. The bonds mature...
Tiling Corporation’s bonds pay $110 in annual interest, with a
$1,000 par value. The bonds mature in 20 years. Your required rate
of return is 9%.
a. Calculate the value of the bond
b. How does the value change if your required rate of return
increases to 12%?
c. How does the value change if your required rate of return
decreases to 6%?
The 16-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market...
The 16-year, $1,000 par value bonds of Waco Industries pay 11
percent interest annually. The market price of the bond is $945,
and the market's required yield to maturity on a comparable-risk
bond is 10 percent.
a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you given the market's
required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?
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