In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation's balance sheet (book values) as of today is as follows: Long-term debt (bonds, at par) $25,500,000 Preferred stock 1,000,000 Common stock ($10 par) 10,000,000 Retained earnings 4,000,000 Total debt and equity $40,500,000 The bonds have a 6.3% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 20 years from today. The yield to maturity is 9%, so the bonds now sell below par. What is the current market value of the firm's debt? Do not round your intermediate calculations. a. $20,534,847 b. $19,102,290 c. $19,830,403 d. $19,214,996 e. $19,165,255

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures from historical book values to market values. KJM Corporation's balance sheet (book values) as of today is as follows: Long-term debt (bonds, at par) $25,500,000 Preferred stock 1,000,000 Common stock ($10 par) 10,000,000 Retained earnings 4,000,000 Total debt and equity $40,500,000 The bonds have a 6.3% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 20 years from today. The yield to maturity is 9%, so the bonds now sell below par. What is the current market value of the firm's debt? Do not round your intermediate calculations. a. $20,534,847 b. $19,102,290 c. $19,830,403 d. $19,214,996 e. $19,165,255

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