EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 17PROB
Summary Introduction
WW needs $84 million to support operations. To raise the needed funds, the firm issued bonds at $1,000 each bond. The flotation cost is 3% and other expenses are $487,000. Calculate the number of outstanding bonds to be issued.
Debt financing is the process of raising debt capital by issuing shares to investors due to short-term need or long-term goal or for the future growth of the firm.
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Wilderness World (WW) needs to raise $84 million in debt. To issue the debt, WW must pay its underwriter a fee equal to 3% of the issue. The company estimates that other expenses associated with the issue will total $487,000. If the face value of each bond is $1,000, how many bonds must be issued to net the needed $84 million?
Grand Energy Corporation (GE) plans to issue bonds to raise $299 million. Ge's Investment banker will charge 8 percent of the total amount issued to help raise the funds. The market value of each bond at issue time will be $1,000. How many bonds must GE sell to net $299 million after flotation costs? Assume that fractions of bonds cannot be issued. Round yout answer to the nearest whole number, bonds Show how much of the total amount issued will consist of flotation costs and how much GE will receive after flotation costs are paid. Enter your answers in dollars. For example, on answer of $2 million should be entered as 2,000,000, not 2. Round your answers to the nearest dollar Floation costs $ Net proceeds:
Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs to support future operations. MM's investment banker will charge flotation costs of 2.5% of the total amount issued to help MM raise the funds. In addition, MM will incur other costs associated with the issue that equal $500,000. The market value of each bond at issue time will be $1,000. How many bonds must GM sell to net $175 million that it needs?
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Bond Valuation - A Quick Review; Author: Pat Obi;https://www.youtube.com/watch?v=xDWTPmqcWW4;License: Standard Youtube License