As the financial manager at Eco-Food, a successful food company, your responsibility is to raise $30...

 

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As the financial manager at Eco-Food, a successful food company, your responsibility is to raise $30 million for a significant expansion project. The strategy involves issuing 15-year zero-coupon bonds, each with a $1,000 face value. These bonds will be sold at a discount and are expected to yield 8% upon maturity, with interest compounding semi-annually. (a) Calculate the total number of zero-coupon bonds Eco-Food must issue to secure the necessary funds. Round your answer to the nearest whole number. (6 marks) (b) Based on your answer in part a, determine the total amount Eco-Food will need to repay to the bondholders when the bonds mature after 15 years. (2 marks) (c) Identify a contractual feature that can be included in the bond issuance to ensure the funds will be available for repayment at maturity. Provide a brief explanation. [Word limit: 100 words] (4 marks) As the financial manager at Eco-Food, a successful food company, your responsibility is to raise $30 million for a significant expansion project. The strategy involves issuing 15-year zero-coupon bonds, each with a $1,000 face value. These bonds will be sold at a discount and are expected to yield 8% upon maturity, with interest compounding semi-annually. (a) Calculate the total number of zero-coupon bonds Eco-Food must issue to secure the necessary funds. Round your answer to the nearest whole number. (6 marks) (b) Based on your answer in part a, determine the total amount Eco-Food will need to repay to the bondholders when the bonds mature after 15 years. (2 marks) (c) Identify a contractual feature that can be included in the bond issuance to ensure the funds will be available for repayment at maturity. Provide a brief explanation. [Word limit: 100 words] (4 marks)

Answer rating: 100% (QA)

EcoFood Bond Issuance a Number of Bonds Issued 1 Present Value PV We need to find the present value ... View the full answer