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(Cost of debt) Sincere Stationery Corporation needs to raise $473,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 11.9 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.3 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...
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(Cost of debt) Gillian Stationery Corporation needs to raise $579,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 7.2 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 11.1 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...
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nlewOTR.Moduie 4 re: 0 of 1 pt blem 9-12 (similar to) Homework 11 oF 20 (9 complete) HW Score: 375%, E Question st of debl) Sincere Stationery Corporation needs to raise $800,000 to imprave its manufacturing plant it has decided to issue a $1,000 par value bond with an annual coupon rate of 17 percent and a maturity of 16 yea estors require a rate of return of 11 percent Computo the market value of the bonds What will the...
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3-19 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 2.5 percent of the total amount issued to help MMM raise the funds. In addition, MM will incur other costs associated with the issue that total $500,000. The market value of each bond at issue time will be $1,000. How many bonds must MM sell to net $175 million after flotation costs? Assume that fractions...
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Costly Corporation plans a new issue of bonds with a par value
of $1000, a maturity of 24 years, and an annual coupon rate of
12.0%. Flotation costs associated with a new debt issue would equal
6.0% of the market value of the bonds. Currently, the appropriate
discount rate for bonds of firms similar to Costly is 13.0%. The
firm's marginal tax rate is 30%. What will the firm's true cost of
debt be for this new bond issue?
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1-Bushwhacker Mowing needs $360 million to
support growth. If it issues new common stock to raise the funds,
the flotation (issuance) costs will be 4 percent. If Bushwhacker
can issue stock at $60 per share, how many shares of common stock
must be issued so that it has $360 million after flotation
costs? Show how much of the issue will consist of flotation costs
and how much Bushwhacker will receive after flotation costs are
paid.
2-Mom's Motel Corporation (MM) plans...
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. Global Products plans to issue long-term bonds to raise funds
to finance its growth. The company has existing bonds outstanding
that are similar to the new bonds it expects to issue. the existing
bonds have a face value equal to $1000, mature in 10 years, pay $70
interest annually (compounded semi-annually), and are currently
selling for $1057 each. Global's marginal tax rate is 35 percent.
a. What should be the coupon rate on the new bond issue? b. What...
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Selling bonds. Rawings needs to raise $40,200,000 for its new manufacturing plant in Jamaica. Berkman Investment Bank will sell the bond for a commission af 2.5%. The market yield is currently 7.3% on twenty-year zero-coupon bonds. If Rawlings wants to issue a zero-coupon bond, how many bonds will it need to sell to raise the $40,200,000? Assume that the bond is semiannual and issued at a par value of $1,000 How many bonds will Rawlings need to sell to raise...
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(Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has $1,000 par value (face value) and a contract
or coupon interest rate of 8 percent. A new issue would have a
floatation cost of 8 percent of the $1,145 market value. The bonds
mature in 14 years. The firm's average tax rate is 30 percent and
its marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.40...
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The required return (or cost) of previously issued debt is often referred to as the projected rate. It usually differs from the cost of newly raised financial capital. Consider the case of Peaceful Book Binding Company: Peaceful Book Binding Company is considering issuing a new twenty-five-year debt issue that would pay an annual coupon payment of $75. Each bond in the issue would carry a $1,000 par value and would be expected to be sold for a market price equal...
(Cost of debt) Sincere Stationery Corporation needs to raise $473,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 11.9 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.3 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...
(Cost of debt) Gillian Stationery Corporation needs to raise $579,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 7.2 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 11.1 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...
nlewOTR.Moduie 4 re: 0 of 1 pt blem 9-12 (similar to) Homework 11 oF 20 (9 complete) HW Score: 375%, E Question st of debl) Sincere Stationery Corporation needs to raise $800,000 to imprave its manufacturing plant it has decided to issue a $1,000 par value bond with an annual coupon rate of 17 percent and a maturity of 16 yea estors require a rate of return of 11 percent Computo the market value of the bonds What will the...
3-19 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 2.5 percent of the total amount issued to help MMM raise the funds. In addition, MM will incur other costs associated with the issue that total $500,000. The market value of each bond at issue time will be $1,000. How many bonds must MM sell to net $175 million after flotation costs? Assume that fractions...
Selling bonds. Rawings needs to raise $40,200,000 for its new manufacturing plant in Jamaica. Berkman Investment Bank will sell the bond for a commission af 2.5%. The market yield is currently 7.3% on twenty-year zero-coupon bonds. If Rawlings wants to issue a zero-coupon bond, how many bonds will it need to sell to raise the $40,200,000? Assume that the bond is semiannual and issued at a par value of $1,000 How many bonds will Rawlings need to sell to raise...
(Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has $1,000 par value (face value) and a contract
or coupon interest rate of 8 percent. A new issue would have a
floatation cost of 8 percent of the $1,145 market value. The bonds
mature in 14 years. The firm's average tax rate is 30 percent and
its marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.40...
The required return (or cost) of previously issued debt is often referred to as the projected rate. It usually differs from the cost of newly raised financial capital. Consider the case of Peaceful Book Binding Company: Peaceful Book Binding Company is considering issuing a new twenty-five-year debt issue that would pay an annual coupon payment of $75. Each bond in the issue would carry a $1,000 par value and would be expected to be sold for a market price equal...