Question
In: Finance
(Cost of debt) Sincere Stationery Corporation needs to raise $750,000 to improve its manufacturing plant. It...
(Cost of debt) Sincere Stationery Corporation needs to raise $750,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 16 percent and a maturity of 15 years. The investors require a rate of return of 8 percent.
a. Compute the market value of the bonds.
b. What will the net price be if flotation costs are
1111
percent of the market price?
c. How many bonds will the firm have to issue to receive the needed funds?
d. What is the firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is
3737
percent?
Solutions
jeff jeffy answered 5 months agoRelated Solutions
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