Compute the market value of the bonds

Assignment Help Finance Basics
Reference no: EM131332105

(Cost of debt) Sincere Stationery Corporation needs to raise $450,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 18 percent and a maturity of 12 years. The investors require a rate of return of 9 percent.

a. Compute the market value of the bonds.

b. What will the net price be if flotation costs are 13 percent of the market price?

c. How many bonds will the firm have to issue to receive the needed funds?

d. What is the firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 31 percent?

Reference no: EM131332105

Questions Cloud

Calculate the mirr of the project using all three methods : The company uses an interest rate of 10 percent on all of its projects. Calculate the MIRR of the project using all three methods.
Shell knob ships cat food throughout the country : Norma's Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two and one-half days.
Issuing bonds at face value : To illustrate, assume that Devor Corporation issued 100, 5-year, 10%, $1,000 bonds dated January 1, 2007, at 100 (100% of face value). Assume interest is payable annually on January 1.
Discuss the overlap of the disciplines of anthropology : Discuss the overlap of the disciplines of anthropology and history. What can the various sub disciplines of anthropology contribute to our understanding of history
Compute the market value of the bonds : a. Compute the market value of the bonds. b. What will the net price be if flotation costs are 13 percent of the market price? c. How many bonds will the firm have to issue to receive the needed funds?
How prepared were your group members for the discussion : Group Interaction from your team's collaborative activity discussions: How clear was the intent of the discussion? How prepared were your group members for the discussion? Did everyone participate equally in the discussion
Stock dividends and capital gains : Stock dividends are_____ and capital gains are ____
Prove that is it also a convex set : Prove that it is a compact set. Is it also a convex set? If you answer yes, provide a proof; if you answer no, provide a counterexample.
Considering two projects for inclusion in its capital budget : Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash..

Reviews

Write a Review

 

Finance Basics Questions & Answers

  What is cj cos cost of equity

CJ Co stock has a beta of 0.9, the current risk-free rate is 5.6, and the expected return on the market is 13 percent. What is CJ Co's cost of equity?

  Determine the annual investment in an equally weighted

Determine the annual investment in an equally weighted portfolio

  Contrast primary market and secondary market transactions

Financial management is concerned with the maintenance and creation of wealth. For the risk-averse financial manager, the more risky a given course of action, the higher the expected return must be.

  What evidence do you observe from analyzing the financial

What evidence do you observe from analyzing the financial statements that might signal the cash flow problems experienced in mid-Year 14? Can FBN avoid bankruptcy during Year 15? What changes in the design or implementation of FBN's strategy would yo..

  The new asset will cost 75000 and will also be depreciated

a corporation has decided to replace an exisiting asset with a newer model. two years ago the existing asset

  What minimum sample size of randomly selected pregnancies

what minimum sample size of randomly selected pregnancies should you select?your criteria changed you randomly sample

  What is nominal interest rate on a 7-year treasury security

The maturity risk premium is estimated to be 0.0005 x (t-1), where t = number of years to maturity. What is the nominal interest rate on a 7 year Treasury security?

  Suppose interest rate parity holds and the current

use the information below to answer the following questions.nbspcurrency per u.s. canada dollar1.23896-months

  Record the transactions in the books of prime entry.

Record the transactions in the books of prime entry. Transfer those entries to the ledger accounts.Prepare the trial balance.

  Steps in the operating budget process

Discuss the most important steps in the operating budget process. Why are these more important than the other steps? Which is better the top-down budgeting process or the bottom-up methods? Why?

  Behavior during the initial a phase of an aba design

Why is it essential for researchers to establish a stable baseline of behavior during the initial A phase of an ABA design?

  Managed care contracting terms

Identify 8 managed care contracting terms and how they impact the way that health care is delivered in the United States. Managed care has changed so dramatically in the United States over the years. What did managed care look like 10 years ago comp..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd