Question: IBM wishes to raise 1 billion and is trying to

IBM wishes to raise $1 billion and is trying to decide between a domestic dollar bond issue and a Eurobond issue. The U.S. bond can be issued at a coupon of 6.75%, paid semiannually, with underwriting and other expenses totaling 0.95% of the issue size. The Eurobond would cost only 0.55% to issue but would bear an annual coupon of 6.88%. Both issues would mature in 10 years.
a. Assuming all else is equal, which is the least expensive issue for IBM?
b. What other factors might IBM want to consider before deciding which bond to issue?

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  • CreatedJune 27, 2014
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