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MS Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par) $10,000,000...

MS Corporation's balance sheet as of today is as follows:

Long-term debt (bonds, at par) $10,000,000
Preferred stock 2,000,000
Common stock ($10 par) 10,000,000
Retained earnings 4,000,000
Total debt and equity

$26,000,000

The bonds have an 6.4% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?

Solutions

Expert Solution

AS NOTHING WAS MENTIONED, NO INTERMEDIATE ROUNDING IS DONE.

IF WE TAKE PRICE OF BOND = 678.84 (ROUNDED TO 2 DECIMALS]

CURRENT MARKET VALUE OF DEBT WILL BE = 6,788,400

jeff jeffy answered 8 months ago
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