What are the different types of bonds that will be offered

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Reference no: EM131139085

Financial Accounting and Reporting - Business Environmental Concepts

The ABC Company has decided to finance expansion by issuing $10 million worth of 20-year debenture bonds and will ask a number of underwriters to bid on the bond issue.

Individual Portion

Write a report of 1-2 pages in which you explain why a company would want to use bonds to expand its business. In your report, you must answer the following questions:

• What considerations will you use in deciding the face value of the bonds?
• What considerations will you use in deciding the interest rate?
• What are the different types of bonds that will be offered?
• Discuss if the bonds must sell at a discount or at a premium, and why?
• How would the NPV, IRR, payback, discounted payback, and discounted annual cash flows help in management's decision making?

o What are the advantages and disadvantages of each and can you use only one to make the decision or do you need to use them all?
o Assume the following in computing this (the dollar amounts are in millions):

Year 0: Cash flow is $(10)
Year 1: Cash flow is $ 6
Year 2: Cash flow is $7
Year 3: Cash flow is $10
Discount Factor is 30%

Reference no: EM131139085

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