Question

In: Finance

Suppose your company needs to raise $55 million and you want to issue 30-year bonds for...

Suppose your company needs to raise $55 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 to raise the $55 million?
a-2. How many of the zeroes would you need to issue? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b-1. In 30 years, what will your company’s repayment be if you issue the coupon bonds? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
b-2. What if you issue the zeroes? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
c. Calculate the aftertax cash flows for the first year for each bond. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.)

Solutions

Expert Solution

­SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE


Related Solutions

Suppose your company needs to raise $55 million and you want to issue 25-year bonds for...
Suppose your company needs to raise $55 million and you want to issue 25-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 30 percent. Assume a par value of $1,000. a-1. How many of the coupon bonds would you need to issue to raise the $55...
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 $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 $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 $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...
Suppose your company needs to raise $43 million and you want to issue 30-year bonds for...
Suppose your company needs to raise $43 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 6 percent, and you’re evaluating two issue alternatives: A semiannual coupon bond with a 6 percent coupon rate and a zero coupon bond. Your company’s tax rate is 35 percent. Assume a par value of $1,000 a-1. How many of the coupon bonds would you need to issue to raise the $43...
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 $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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT