8-8. To raise capital, what are the pros and cons of selling bonds compared to issuing stock or borrowing money from a bank?
Selling bonds is one of the ways to raise capital for a company just as issuing stocks or borrowing money from the bank.
However, selling bonds has its share of benefits and drawbacks when viewed from the perspective of the company.
Benefits
Drawbacks
8-8. To raise capital, what are the pros and cons of selling bonds compared to issuing...
Companies sell common stock to raise long-term capital. What are the pros and cons of selling stock? Is it better to sell common or preferred stock? Why?
What are the pros and cons for using venture capital and bank loans as a source of financing a small business?
What are some advantages of issuing bonds versus borrowing money from a bank? What are some disadvantages of issuing bonds versus borrowing money from a bank? Why do you think a business chooses to do one versus the other?
Why do companies choose to raise capital by borrowing versus issuing stock?Is borrowing more expensive than issuing stock or less expensive?
With celebrity bonds, celebrities raise money by issuing bonds to investors. The royalties from sales of the music are used to pay interest and principal on the bonds. In April of 2009, EMI announced that it intended to securitize its back catalogue with the help of the Bank of Scotland. The bond was issued with a coupon rate of 6.9% and will mature on this day 36 years from now. The yield on the bond issue is currently 6.1%. At...
With celebrity bonds, celebrities raise money by issuing bonds to investors. The royalties from sales of the music are used to pay interest and principal on the bonds. In April of 2009, EMI announced that it intended to securitize its back catalogue with the help of the Bank of Scotland. The bond was issued with a coupon rate of 6.95% and will mature on this day 26 years from now. The yield on the bond issue is currently 6.45%. At...
With celebrity bonds, celebrities raise money by issuing bonds to investors. The royalties from sales of the music are used to pay interest and principal on the bonds. In April of 2009, EMI announced that it intended to securitize its back catalogue with the help of the Bank of Scotland. The bond was issued with a coupon rate of 6.8%and will mature on this day 20 years from now. The yield on the bond issue is currently 6.4%. At what...
Caughlin Company needs to raise $55 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 55 percent common stock, 15 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 7 percent, for new preferred stock, 4 percent, and for new debt, 2 percent. What is the true initial cost...
Shamrock Inc. has decided to raise additional capital by issuing $171,000 face value of bonds with a coupon rate of 11%. In discussions with investment bankers, it was determined that to help the sale of the bonds, detachable stock warrants should be issued at the rate of one warrant for each $100 bond sold. The value of the bonds without the warrants is considered to be $115,200, and the value of the warrants in the market is $28,800. The bonds...
1) What is the advantage of issuing a bond versus issuing common stock? 2) What is the advantage of issuing a bond versus borrowing money from a bank? 3) How is the bond price determined?