Determine the bond price

Assignment Help Finance Basics
Reference no: EM1365204

A company is trying to raise $43 million of external funding. Would there be financial leverage and what kind of financial leverage would be present if a company could issue bonds in the capital market, preferring a bond issue over bank financing because of the restrictions the bank imposes with its standard loan covenants. Among the restrictions would be a prohibition on the acquisition of other companies while the loan is outstanding. If the company plans to continue its 14% rate of growth through acquisitions and such a restriction would force the company to develop a new strategic plan. A sinking fund will be invested at 5% annual interest, the annual payments that must be contributed to the account for each of the ten years is $3,418,696.72 and the company can expect to see the following proceeds at each one of the following rates:

7.00% $34,511,174.73
7.50% $35,818,354.48
8.00% $37,125,534.22
8.50% $38,432,713.97
9.00% $39,739,893.71
9.25% $40,393,483.59
9.50% $41,047,073.46
10.00% $42,354,253.21
10.25% $43,000,000.00
10.50% $43,661,432.95

What rate would they issue the bonds? And what kind of financial leverage would the company have be issuing these bonds?

 

Reference no: EM1365204

Questions Cloud

Find the period of this oscillation : find the period of this oscillation.
Determination of expected rate of return : Williams and Westrich stock is currently selling for $15.25 each share, and the dividend is expected to continue at 92¢ per share. Management expects the stock to grow at 8 percent.
Calculate net income-balance in retaining earnings : Calculate the amount of additional investment that the stockholders made during 2011. Assuming that the corporation declared and paid $10,000 in dividends during 2011, calcuate the amount of net income earned by the corporation during 2011.
Explain and analyze the civil rights act : Explain and Analyze the Civil Rights Act of 1964 to determine which part of the act is the most difficult to enforce and Discuss the difficulties you have identified as well as steps that could be taken to address those difficulties
Determine the bond price : A company is planning to increase $43 million of external funding. Would there be financial leverage and what kind of financial leverage would be present if a corporation could issue bonds in the capital market,
Determine the magnitude of f3 : A ship sets out to sail to a point 148km due north. An unexpected storm blows the ship to a point 109km due east of its starting point.
Information about earning per share : For 2010, Skresso Co. reported $3.64 of earnings per share of common stock. During 20011 the firm had a 4% common stock dividend.
Presume you are a new division manager : Presume you are a new division manager within a family-owned organization where the CEO has been in place for years
What focal length does the lens require : What focal length does the lens need. Find out the electrostatic force exerted on one sphere by the other.

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Determine the rate of return

Determine the rate of return you would earn if you paid $950 for a perpetuity that pays $85 each year?

  Describe the acquisition affects

The book value of Nott's Nursery's total assets is $400,000. Assume Golden Gardens Inc. acquires Nott's Nursery's assets for 1 million dollar and finances the purchase by selling $600,000 in new stock,

  Compute the break-even point in boxes

Jack and Joe, Corporation, sells fine chocolates at $15 a box. The fixed costs of this operation are $80,000, while the variable cost each box is $10.

  Compute value of the store

You are trying to assess the value of a small retail store that is up for sale. The store generated cash flow to it owner of $100,000 in the most profitable year of operation and is expected to have growth of about 5 percent a year in perpetuity.

  Find the total carrying cost and restocking cost

Auto Parts sells 1,200 electric parts per week and then reorders another 1,200 parts. If the relevant carrying cost per electric part is $4 and the fixed order cost is $750,

  Find a potential capital project

Find a potential capital project for your company describe such a project and write a short summary of the problems you see in getting the funding to see it through.

  Objective type questions on bond valuation and wacc

Objective type questions on bond valuation and WACC and project evaluation and find the relative risk of a proposed project is best accounted for by

  Computation of annual interest rate based on given cash flow

Computation of annual interest rate based on given cash flows and find the annual interest rate

  Determine net investment

Syracuse Roadbuilding Corporation is planning the purchase of a new tandem box dump truck. The truck costs $95,000, and an additional $5,000 is needed to paint it with the firm logo and install radio equipment.

  Loan amortization-compounding quarterly

Find out the payment necessary to amortize loan of $10,000 if interests rate is 8% compound quarterly and there are 20 quarterly payments.

  Calculating the value of securities

Assume that you inherited some money. A friend of yours is working as unpaid intern at local brokerage firm, and her boss is selling securities that call for 4 payments-You should compute the value of securities to decide whether they are the good i..

  Finding information about amazons ipo

Finding information about Amazons IPO.

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