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CMS Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par) $10,000,000...

CMS Corporation's balance sheet as of today is as follows:

Long-term debt (bonds, at par) $10,000,000
Preferred stock 2,000,000
Common stock ($10 par) 10,000,000
Retained earnings 4,000,000
Total debt and equity $26,000,000

The bonds have a 8.2% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?

Select the correct answer.

a. $7,820,715
b. $7,821,233
c. $7,820,197
d. $7,819,680
e. $7,819,162
business   finance   
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Answer #1

No of Bonds Total Debt/face value of Bond 10000000/1000 10000 Bonds 20 If Semi Annual Coupon Nper Pmt Rate Fy 10*2 1000*0.082

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