Question

Cali Inc. wants to issue new 10-year bonds to fund its new investments. The company currently has 5 percent coupon bonds on the market that sell for $1,060. These bonds make semi-annual payments, and mature in 10 years. What coupon rate should the company set on its new bonds if it wants them to sell at par?What is the yield to maturityon the bonds?

Answer 1

Answer:
Calculation of cost of Debt
Formula =
Cost of debt =	Lower rate +	Price at lower rate - Current price	x (Higher rate - Lower rate)
		Price at lower rate - Price at higher rate
Price=	Present value of all future Cash inflows
Current price	1060.00
Present value at lower rate   =		4%			Present value at higher rate   =	5%
Year	Cash Inflows	Present value factor @ 2%	Present value of cash inflows		Year	Cash Inflows	Present value factor @ 2.5%	Present value of cash inflows
1	25.00	0.98039	24.51		1	25.00	0.9756	24.39
2	25.00	0.96117	24.03		2	25.00	0.9518	23.80
3	25.00	0.94232	23.56		3	25.00	0.9286	23.21
4	25.00	0.92385	23.10		4	25.00	0.9060	22.65
5	25.00	0.90573	22.64		5	25.00	0.8839	22.10
6	25.00	0.88797	22.20		6	25.00	0.8623	21.56
7	25.00	0.87056	21.76		7	25.00	0.8413	21.03
8	25.00	0.85349	21.34		8	25.00	0.8207	20.52
9	25.00	0.83676	20.92		9	25.00	0.8007	20.02
10	25.00	0.82035	20.51		10	25.00	0.7812	19.53
11	25.00	0.80426	20.11		11	25.00	0.7621	19.05
12	25.00	0.78849	19.71		12	25.00	0.7436	18.59
13	25.00	0.77303	19.33		13	25.00	0.7254	18.14
14	25.00	0.75788	18.95		14	25.00	0.7077	17.69
15	25.00	0.74301	18.58		15	25.00	0.6905	17.26
16	25.00	0.72845	18.21		16	25.00	0.6736	16.84
17	25.00	0.71416	17.85		17	25.00	0.6572	16.43
18	25.00	0.70016	17.50		18	25.00	0.6412	16.03
19	25.00	0.68643	17.16		19	25.00	0.6255	15.64
20	1025.00	0.67297	689.80		20	1025.00	0.6103	625.53
		Total	1081.76				Total	1000.00
Price at higher rate	1081.76				Price at higher rate	1000.00
Cost of Debt (semi annual)	2% +	21.7572	x (2.5-2)%
		81.7572				jeff jeffy Next > < Previous Related Solutions Seether Co. wants to issue new 17-year bonds for somemuch-needed expansion projects. The company currently... Seether Co. wants to issue new 17-year bonds for some much-needed expansion projects. The company currently has 6.8 percent coupon bonds on the market that sell for $840.71, make semiannual payments, and mature in 17 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? BC Co. wants to issue new 15-year bonds for some much-needed expansion projects. The company currently... BC Co. wants to issue new 15-year bonds for some much-needed expansion projects. The company currently has 5% coupon bonds on the market that sell for $1,050 make semiannual payments, and matures in 15 years. What coupon rate should the company set on its new bonds if it wants them to sell at $950? Chamberlain Co. wants to issue new 17-year bonds for some much-needed expansion projects. The company currently... Chamberlain Co. wants to issue new 17-year bonds for some much-needed expansion projects. The company currently has 7.0 percent coupon bonds on the market that sell for $827.53, make semiannual payments, and mature in 17 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000. Multiple Choice • 8.70% • 9.00% • 9.30% • 8.90% • 4.50% Chamberlain Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently... Chamberlain Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 8.6 percent coupon bonds on the market that sell for $947.70, make semiannual payments, and mature in 18 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000. Seether Co. wants to issue new 12-year bonds for some much-needed expansion projects. The company currently... Seether Co. wants to issue new 12-year bonds for some much-needed expansion projects. The company currently has 7.2 percent coupon bonds on the market that sell for $772.12, make semiannual payments, and mature in 12 years. what coupon rate should the company set on its new bonds if it wants them to sell at par? Please answer with excel using YIELD Chamberlain Co. wants to issue new 14-year bonds for some much-needed expansion projects. The company currently... Chamberlain Co. wants to issue new 14-year bonds for some much-needed expansion projects. The company currently has 7.8 percent coupon bonds on the market that sell for $762.45, make semiannual payments, and mature in 14 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000. A New Corp. wants to issue bonds with a 10% coupon rate, a face value of... A New Corp. wants to issue bonds with a 10% coupon rate, a face value of $1,000, and 15 years to maturity. It estimates that the bonds will sell for $1,100 and that flotation costs will equal $15 per bond. The common stock currently sells for $30 per share and they can sell additional shares by incurring flotation costs of $3 per share. A dividend was paid yesterday of $4.00 per share and expects the dividend to grow at a... Srorm Software wants to issue $100 million ($1,000 x 100,000 bonds) in new capital to fund... Srorm Software wants to issue $100 million ($1,000 x 100,000 bonds) in new capital to fund new opportunities. If Storm raised the $100 million of new capital in a straight-debt 20-year bond offering, Storm would have to offer an annual coupon rate of 13%. However, Storm's advisers have suggested a 20-year bond offering with warrants. According to the advisers, Storm could issue 10% annual coupon-bearing debt with 28 warrants per $1,000 face value bond. Storm has 10 million shares of... Seether Co. wants to issue new 11-year bonds for some much needed expansion projects. The company... Seether Co. wants to issue new 11-year bonds for some much needed expansion projects. The company currently has 11.0 percent coupon bonds on the market that sell for $1,122.91, make semiannual payments, and mature in 11 years. What coupon rate should the company set on its new bonds if it wants them to sell at par value? A. 9.50% B. 9.10% C. 8.90% D. 4.60% E. 9.20% Mufala, Inc., will issue $10,000,000 of 6% 10-year bonds. The market rate for bonds with similar... Mufala, Inc., will issue $10,000,000 of 6% 10-year bonds. The market rate for bonds with similar risk and maturity is 8%. Interest will be paid by Mufala semiannually. What is the issue price of the bonds? (Refer to the appropriate table in the Present and Future Value Tables section of your tex Issue price of the bonds__________ ? ADVERTISEMENT Subjects Accounting Advanced Math Anatomy and Physiology Biology Chemistry Civil Engineering Computer Science Economics Electrical Engineering Finance History Math Mechanical Engineering Operations Management Physics Psychology Statistics and Probability Nursing Other ADVERTISEMENT Latest Questions Question 3 (10 marks) For your answer to Question 3, consider two examples of decisions that... Write a function which lets the user enter English words. The user can keep entering English... It composed 16K × 16 memory by using two DRAM chips that have 8K capacity. If... We are evaluating a project that costs $1,140,000, has a life of 10 years, and has... The plasma membrane is a structure common to all cell types and important in providing the... What is your sense of others’ willingness to support change efforts for improvement in your organization?... Maggie is a 61 year old female referred to home health OT on October 29th with... ADVERTISEMENT About @ 2020 WizEdu