Calculate the value of new value bond

Assignment Help Financial Management

Reference no: EM131510839

ABC Corp. has been forced to file for bankruptcy. The company has been allowed to reorganize and the courts have specified for a new bond with more favorable terms to be issued. The new issue will consist of 20-year, 12% coupon rate bond with semiannual coupons and each bond in the issue having a $1,000 par value. However, the new bond indenture relieves the company of making interest payments for the first 6 years. For the remaining 14 years, the regular interest payments would resume. The reorganization calls for the $720 in deferred interest to be paid in 2 equal installments; one payment of $360 at the end of year 12 and one payment of $360 at maturity.

Calculate the value of a new $1,000 par value bond assuming a yield to maturity of 10%. Show your work.

Reference no: EM131510839

Questions Cloud

Project has an initial requirement : A project has an initial requirement of $198,955 for new equipment and $10,880 for net working capital. What is the project's NPV if the tax rate is 37%?

What is the annual worth of each option : Parker County Community College (PCCC) is trying to determine whether to use no insulation. What is the annual worth of each option?

What is the operating cash flow : ABC, Inc., is considering purchase of a new equipment. what is the operating cash flow?

The final payment the bank will require you to make : what final payment will the bank require you to make so that it is indifferent to the two forms of payment?

Calculate the value of new value bond : ABC Corp. has been forced to file for bankruptcy. Calculate the value of a new $1,000 par value bond assuming a yield to maturity of 10%.

Nominal cost of trade credit-effective cost of trade credit : Cost of Trade Credit What is the nominal and effective cost of trade credit under the credit terms of 1/15, net 30?

Indifferent to the two forms of payment : what final payment will the bank require you to make so that it is indifferent to the two forms of payment?

What proportion of textbook receives favorable reviews : The editor of a textbook publishing company is trying to decide whether to publish a proposed business statistics textbook. What proportion of textbook receives

What is the probability that the portfolios value moves : What is the probability that the portfolio's value moves in the same direction in both of the next two years?

User Account

All Pages