Question

In: Finance

Suppose your company needs to raise $40.7 million and you want to issue 20 year bonds...

Suppose your company needs to raise $40.7 million and you want to issue 20 year bonds for this purchase. Assume the required return on your bond issue will be 5.7 percent semiannual coupon bond and a zero coupon bond. Your company's tax rate is 22 percent. Assume that the IRS amortization rules apply for the zero coupon bonds. Calculate the firm's aftertax cash outflows for the first year under the two different scenarios?

Solutions

Expert Solution

jeff jeffy answered 11 hours ago
Next > < Previous

Related Solutions

Suppose your company needs to raise $30 million and you want to issue 20-year bonds for...
Suppose your company needs to raise $30 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 7.5 percent, and you’re evaluating two issue alternatives: a 7.5 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent. Requirement 1: (a) How many of the coupon bonds would you need to issue to raise the $30 million? (Do not round intermediate calculations. Enter the...
Suppose your company needs to raise $40.4 million and you want to issue 20-year bonds for...
Suppose your company needs to raise $40.4 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 5.4 percent, and you’re evaluating two issue alternatives: a 5.4 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 24 percent. a. How many of the coupon bonds would you need to issue to raise the $40.4 million? How many of the zeroes would you need to...
Suppose your company needs to raise $30 million and you want to issue 20-year bonds for...
Suppose your company needs to raise $30 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 7.5 percent, and you’re evaluating two issue alternatives: a 7.5 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent. Requirement 1: (a) How many of the coupon bonds would you need to issue to raise the $30 million? (Do not round intermediate calculations. Enter the...
Suppose your company needs to raise $41 million and you want to issue 20-year bonds for...
Suppose your company needs to raise $41 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 6.1 percent, and you’re evaluating two issue alternatives: a 6.1 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 25 percent. a. How many of the coupon bonds would you need to issue to raise the $41 million? How many of the zeroes would you need to...
Suppose your company needs to raise $36.4 million and you want to issue 24-year bonds for...
Suppose your company needs to raise $36.4 million and you want to issue 24-year bonds for this purpose. Assume the required return on your bond issue will be 8.9 percent, and you’re evaluating two issue alternatives: an 8.9 percent semiannual coupon bond and a zero coupon bond. Your company’s tax rate is 35 percent. Both bonds would have a face value of $1,000.    a. How many of the coupon bonds would you need to issue to raise the $36.4...
Suppose your company needs to raise $65 million and you want to issue 30-year bonds for...
Suppose your company needs to raise $65 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 5 percent, and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 5 percent and a zero coupon bond. Your company’s tax rate is 21 percent. Both bonds will have a par value of $2,000. a-1. How many of the coupon bonds would you need to issue...
Suppose your company needs to raise $50 million and you want to issue 30-year bonds for...
Suppose your company needs to raise $50 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent and you’re evaluating two issue alternatives: a semiannual coupon bond with a 7 percent coupon rate and a zero-coupon bond. Your company’s tax rate is 21 percent. Both bonds would have a par value of $1,000. a. How many of the coupon bonds would you need to issue to raise...
Suppose your company needs to raise $36 million and you want to issue 30-year bonds for...
Suppose your company needs to raise $36 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 7 percent and a zero coupon bond. Your company’s tax rate is 22 percent. Assume a par value of $1,000. a-1. How many of the coupon bonds would you need to issue to raise the...
Suppose your company needs to raise $54 million and you want to issue 25-year bonds for...
Suppose your company needs to raise $54 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 4.8 percent, and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 4.8 percent and a zero coupon bond. Your company’s tax rate is 25 percent. Both bonds will have a par value of $1,000. b-2. What if you issue the zeroes? (Do not round intermediate calculations...
Suppose your company needs to raise $37 million and you want to issue 30-year bonds for...
Suppose your company needs to raise $37 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 8 percent and a zero coupon bond. Your company’s tax rate is 23 percent. Assume a par value of $1,000. How many of the coupon bonds would you need to issue to raise the $37...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT