Firm have to issue to receive the needed funds

Assignment Help Financial Management

Reference no: EM132029140

Sincere Stationery Corporation needs to raise ?$700,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 17 percent and a maturity of 16 years. The investors require a rate of return of 7 percent.

a. Compute the market value of the bonds.

b. What will the net price be if flotation costs are 11 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 35 percent?

e. Rework the problem as follows: Assume a coupon rate of 9 percent.

f. What effect does changing the coupon rate have on the firm's after-tax cost of capital? Why is there a change?

Reference no: EM132029140

Questions Cloud

Balances and the separation of powers as a founding : Can anyone explain checks and balances and the separation of powers as a founding principle of our country, and explain the basic concepts of these principles?

The hamada equation allows the firm : The Hamada equation allows the firm to. In order to find the cost of equity using the firm’s cost of that the rule of thumb is to.

Analyze the competitive advantage of taylor guitars : Evaluate the internal and external environments of Taylor Guitars using an environmental scan.

Pros and cons of internal and external recruiting : What are the pros and cons of internal and external recruiting?

Firm have to issue to receive the needed funds : Compute the market value of the bonds. How many bonds will the firm have to issue to receive the needed funds?

Describe a time that you have experienced implicit bias : The ethical dilemma assignments allow you to utilize what you are learning in this course and have learned in other courses to make rational arguments.

How this mineral maintains bone health at the cellular level : 1. What mineral plays a major role in maintaining your bone health and what foods can you consume to get this mineral?

What is the maximum total depreciation expense : What is the maximum total depreciation expense (§179, bonus, MACRS) that Sivart may deduct in 2017 on the assets it placed in service in 2017

How issue affects cognitive and socioemotional development : How the issue affects physical, cognitive, and socioemotional development? Specific resources that provide additional information about this issue: names.

User Account

All Pages