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

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

​(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 15 percent and a maturity of 18 years. The investors require a rate of return of 9 percent. a. Compute the market value of the bonds. b. What will the net price be if flotation costs are 14 percent of the market​ price? c. How many bonds will the...
​(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...
Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to...
Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 20-year zero coupon bonds to raise the money. The required return on the bonds will be 8 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.)   Issue price $    b. Using the IRS amortization rule, what interest deduction...
Imagination Dragons Corporation needs to raise funds to finance a plant expansion, and it has decided...
Imagination Dragons Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon bonds with a par value of $1,000 each to raise the money. The required return on the bonds will be 8 percent. Assume semiannual compounding periods. 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...
Edison Corporation needs to raise funds to finance a plant expansion and has decided to issue...
Edison Corporation needs to raise funds to finance a plant expansion and has decided to issue 25-year zero coupon bonds to raise the money. The required return on the bonds will be 8 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 company take...
Assume that a corporation needs to enter the private debt market to raise funds for plant...
Assume that a corporation needs to enter the private debt market to raise funds for plant expansion. The corporation expects debt covenants to place restrictions on the levels of its current ratio and total-liabilities-to-assets ratio. Considering the accounts that comprise these ratios, provide examples of accounting estimates, accounting judgments, and structured transactions that the lender should examine closely and explain why each is important. In replies to peers, discuss additional information the lender should consider
A manufacturing corporation has installed a plant and machinery in its factory as on 5th January,...
A manufacturing corporation has installed a plant and machinery in its factory as on 5th January, 2018. The purchase price of that plant and machinery was OMR 220,000 and on this price 8% of trade discount was included and 5% of rebates were included after deducting the trade discount. Initial delivery cost was OMR 12,500 in that 20% of which was handling cost of the whole machinery in the factory building. Cost of testing was OMR 7,500, professional fees to...
The Scandrick Corporation needs to raise $65 million to finance its expansion into new markets. The...
The Scandrick Corporation needs to raise $65 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the the offer price is $35 per share and the company’s underwriters charge a spread of 7 percent, how many shares need to be sold?
Roberts Manufacturing needs to raise $5,000,000. The firm can raise the money by either selling convertible...
Roberts Manufacturing needs to raise $5,000,000. The firm can raise the money by either selling convertible bonds or stock purchase warrants. The convertible bonds will have 20 years to maturity, a 5 percent annual coupon rate and conversion ratio of 25 shares. The stock purchase warrants will have a 20 year maturity, a 6.5 percent annual coupon rate, and have 1 warrant attached to each bond that can be converted into 4 shares of common stock for $40 per share....
XYZ Corporation needs to raise additional capital and is considering a rights issue to raise $5...
XYZ Corporation needs to raise additional capital and is considering a rights issue to raise $5 million. There are currently 1,000,000 shares on issue, trading at $15.00. The company plans to increase the total number of shares on issue to 1,500,000. Calculate the theoretical ex-rights price and the value of a right. a. $18.25, $2.85 b. $13.33, $3.33 c. $15.00, $5.00 d. $13.33, $1.67 e. $12.5, $2.5
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT