Hollydale's will issue an additional 5,000 bonds with the help of an investment banker. The bonds will be semiannual bonds with a maturity of thirty years. The coupon rate will be 8% and the par value $1,000. These bonds will be sold at $851.86 in the market, but the investment banker will receive a 4% commission on the sold bonds. The original bonds have sixteen years to maturity and are semiannual, with a coupon rate of 7.5% and a price of $874.08. There are 10,000 bonds outstanding with this senior issue. What is the new cost of capital for Hollydale's if the company still has 500,000 shares outstanding selling at $21.25 with an annual dividend growth rate of 2% and the last annual dividend of $2.50? The tax rate remains at 35%. 10.5% 11.4% 8.76% 9.64% 9.18%

Hollydale's will issue an additional 5,000 bonds with the help of an investment banker. The bonds will be semiannual bonds with a maturity of thirty years. The coupon rate will be 8% and the par value $1,000. These bonds will be sold at $851.86 in the market, but the investment banker will receive a 4% commission on the sold bonds. The original bonds have sixteen years to maturity and are semiannual, with a coupon rate of 7.5% and a price of $874.08. There are 10,000 bonds outstanding with this senior issue. What is the new cost of capital for Hollydale's if the company still has 500,000 shares outstanding selling at $21.25 with an annual dividend growth rate of 2% and the last annual dividend of $2.50? The tax rate remains at 35%. 10.5% 11.4% 8.76% 9.64% 9.18%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A Boba Drinks LLC. is considering to issue perpetual, callable bonds with a coupon rate of 5% paid annually, and a par value of $1,000. The nominal interest rate on these bonds will be 8% for the next year. Within a year, the nominal rate on the bonds will be either 12% with probability 0.7, or 9% with probability 0.3. The bonds are callable at $1400. If the bonds are called and the interest rate decreases, what is the price of the callable bond today?
Tony's Pizzeria plans to issue bonds with a par value of $1,000 and 10 years to maturity. These bonds will pay $45 interest every 6 months. Current market conditions are such that the bonds will be sold to net $937.79. What is the YTM of the issue that a broker would quote to an investor?
Serotta Corporation is planning to issue bonds with a face value of $460,000 and a coupon rate of 8 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 4 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) 1. Provide the journal entry to record the issuance of the bonds January 1. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.) View transaction list Journal entry worksheet 1 > Record the issuance of the bonds on January 1. Note: Enter debits before credits. Date General Jounral Debit Credit January 01
Serotta Corporation is planning to issue bonds with a face value of $440,000 and a coupon rate of 12 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Serotta uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) 1. Provide the journal entry to record the issuance of the bonds January 1.
Tony's Pizzeria plans to issue bonds with a par value of $1,000 and 10 years to maturity. These bonds will pay $45 interest every 6 months. Current market conditions are such that the bonds will be sold to net $937.79. What is the YTM of the issue that a broker would quote to an investor?(answer to the nearest whole number).
Abbott, Inc., plans to issue $500,000 of ten percent bonds that will pay interest semiannually and mature in five years. Assume that the effective interest rate is 12 percent per year compounded semiannually. How would I Calculate the selling price of the bonds.
The Latham Corporation is planning on issuing bonds that pay no interest but can be converted into $1,000 at maturity, 7 years from their purchase. To price these bonds competitively with other bonds of equal risk, it is determined that they should yield 6 percent, compounded annually. At what price should the Latham Corporation sell these bonds?
Denzel Corporation is planning to issue bonds with a face value of $600,000 and a coupon rate of 7.5 percent. The bonds mature in four years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Denzel uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 8.5 percent (FV of $1. PV of $1. FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. and 2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. 3. What bonds payable amount will Denzel report on its June 30 balance sheet? Complete this question by entering your answers in the tabs below. Required 1 and 2 Required 3 1. and 2. Prepare the journal entries to record the issuance of the bonds and interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal…
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Park Corporation is planning to issue bonds with a face value of $2,800,000 and a coupon rate of 7 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective - interest amortization method and also uses a premium account. Assume an annual market rate of interest of 6.0 percent. (FV of $1, PV of S1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. and 2. Prepare the journal entry to record the issuance of the bonds and the interest payment on June 30 of this year 3. What bonds payable amount will Park report on its June 30 balance sheet?
Cron Corporation is planning to issue bonds with a face value of $700,000 and a coupon rate of 13 percent. The bonds mature in five years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Cron uses the effective-interest amortization method. Assume an annual market rate of interest of 12 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. P10-9 Part 4 4. What is the book value of the bonds on June 30 and December 31 of this year? Note: Round your final answers to nearest whole dollar amount. Bonds payable June 30 December 31
Bandon Manufacturing intends to issue callable, perpetual bonds with annual coupon payments and a par value of $1, 000. The bonds are callable at $1, 230. One year interest rates are 8 percent. There is a 60 percent probability that long-term interest rates one year from today will be 10 percent, and a 40 percent probability that they will be 8 percent. Assume that if interest rates fall the bonds will be called. What coupon rate should the bonds have in order to sell at par value? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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