Question

Gillian Stationery Corporation needs to raise $600,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an 8 percent annual coupon rate (with interest paid semiannually) and a 10-year maturity. Investors require a 10 percent rate of return.
a. Compute the market value of the bonds.
b. How many bonds will the firm have to issue to receive the needed funds?
c. What is the firm’s after-tax cost of debt if the firm’s tax rate is 34 percent?



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  • CreatedOctober 31, 2014
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