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Your firm needs to raise $200M for a plant expansion. $60M will be raised by borrowing...

Your firm needs to raise $200M for a plant expansion. $60M will be raised by borrowing money and your firm will use 30-year coupon bonds. You have been asked to complete the estimate of your firm's cost of debt. Your firm has one issue of debt outstanding. The debt has 5 years to maturity, has a 5% coupon rate, par is $1000 and current price is $975. What is the cost of debt for the new issue? What other checks (at least two) should you make before providing an answer to your boss?

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Answer #1

1.
=RATE(5,5%*1000,-975,1000)=5.5868%

2.
Is the bond callable or puttable or convertible?
Coupon Payment frequency
Tax rate-is the company profitable

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