Question: Romine Delivery Corporation is planning to issue 10 000 000 in
Romine Delivery Corporation is planning to issue $ 10,000,000 in 10-year, 10 percent bonds. The bonds are dated May 1, 2011, and interest is payable annually on May 1. If the bonds are sold on May 1, 2011, to yield the 8 percent market rate of interest, how much cash will Romine Delivery raise by issuing the bonds? How much interest expense will Romine Delivery incur during the first year of the bonds’ life? How much cash will the corporation pay out during the first year of the bonds’ life? Describe the cash outflows of the bonds for the life of the bond issue.
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