Question
In: Finance
Sincere Stationery Corporation needs to raise $480,000 to improve its manufacturing plant. It has decided to...
Sincere Stationery Corporation needs to raise $480,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 11.5 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.5 percent.
a. Compute the market value of the bonds.
b. How many bonds will the firm have to issue to receive the needed funds?
c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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Using the IRS
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expansion and has decided to issue 25-year zero coupon bonds to
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percent. Assume a par value of $1,000 and semiannual
compounding.
a.
What will these bonds sell for at issuance? (Do not
round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
b.
Using the IRS amortization rule, what interest deduction can the
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Assume that a corporation needs to enter the private debt market
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a.
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b.
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c.
$15.00, $5.00
d.
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e.
$12.5, $2.5
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