(Cost of debt) Sincere Stationery Corporation needs to raise $459,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond withan annual coupon rate of 11.2 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.6 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?a. The market value of the bonds is $(Round to the nearest cent.)

Bond Valuation is a valuation technique that is used to find the market value of a particular bond.…

Answered: (Cost of debt) Sincere Stationery…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 16P: Suppose the Schoof Company has this book value balance sheet: The notes payable are to banks, and...

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Suppose the Schoof Company has this book value balance sheet: The notes payable are to banks, and the interest rate on this debt is 10%, the same as the rate on new bank loans. These bank loans are not used for seasonal financing but instead are part of the companys permanent capital structure. The long-term debt consists of 30,000 bonds, each with a par value of 1,000, an annual coupon interest rate of 6%, and a 20-year maturity. The going rate of interest on new long-term debt, rd, is 10%, and this is the present yield to maturity on the bonds. The common stock sells at a price of 60 per share. Calculate the firms market value capital structure.
(Cost of debt) Sincere Stationery Corporation needs to raise $543,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10.9 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 7.7 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? a. The market value of the bonds is $ (Round to the nearest cent.)
(Cost of debt) Sincere Stationery Corporation needs to raise $508,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10.2 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 7.1 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?
(Cost of debt) Gillian Stationery Corporation needs to raise $610,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 7.9 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 10.7 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? a. The market value of the bonds is $ (Round to the nearest cent.) b. The number of bonds that the company needs to sell isbonds. (Round up to the nearest integer.) c. The firm's after-tax cost of debt is. (Round to two decimal places)
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 9 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?
(Cost of debt) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 14 percent and a maturity of 10 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 10.5 percent of the market price? c. How many bonds will the firm have to issue to receive the needed funds? d. What is the firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 21 percent? e. Rework the problem as follows: Assume a coupon rate of 8 percent. f. What effect does changing the coupon rate have on the firm's after-tax cost of capital? Why is there a change? GUD a. If the bond's annual coupon rate is 14%, what is the market value of the bond? (Round to the nearest cent.) b. What will the net price be if flotation costs are 10.5 percent of the market price? (Round to…
Setrakian Industries needs to raise $99.4 million to fund a new project. The company will sell bonds that have a coupon rate of 6.02 percent paid semiannually and that mature in 25 years. The bonds will be sold at an initial YTM of 6.82 percent and have a par value of $2,000. How many bonds must be sold to raise the necessary funds? O 99,400 bonds O 181,154 bonds O 54,939 bonds 68,674 bonds A Moving to another question will save this response. Question 19 of 30
Use the information for the question(s) below. Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten - year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). The following table summarizes the YTM for similar ten - year corporate bonds of various credit ratings: Rating AAA AA A BBB BB YTM 6.70% 6.80% 7.00% 7.40% 8.00% Assuming that Luther's bonds receive a AAA rating, the price of the bonds will be closest to: O A. $937 O B. $1021 OC. $1014 O D. $1000
Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: Rating AAA AA A ВВВ BB YTM 6.6% 6.8% 6.9% 7.3% 7.8% Assuming that Luther's bonds receive a AAA rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to: OA. 30,216 B. 25180 OC. 35,252 OD. 20,144
Seabiscuit Industries needs to raise $51.23 million to fund a new project. The company will sell bonds that have a coupon rate of 5 percent paid semiannually and that mature in 15 years. The bonds will be sold at an initial YTM of 7.25 percent and have a par value of $2,000. How many bonds must be sold to raise the necessary funds? 32,168 O 35,202 32,089 O 20,734 20,549
Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 6.6% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: Rating AAA AA A BBB BB YTM 6.73% 6.93% 7.03% 7.43% 7.93% Assuming that Luther's bonds receive a AAA rating, the price of the bonds will be closest to: O A. $1,189 O B. $1,387 O C. $991 O D. $793
A company is considering starting a new product line. The new product line requires the installation ofnew machines and equipment. For this purpose, company wants to borrow money by issuing bonds of$10,000 for 12-year period. The interest on these bonds is to be paid at a rate of 10% per year. Computethe amount of interest to be paid to bondholders over 12-year period:a) if the simple interest is charged. b) If the interest is compounded annually.

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