Narstek Inc. has decided to issue a 4-year maturity, 15% coupon bonds with a total nominal...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Narstek Inc. has decided to issue a 4-year maturity, 15% coupon bonds with a total nominal value of 300 million . The bonds were sold at a 10% discount and floatation costs amounted to 5% of the total nominal value. The principal will be repaid in equal installments after the first year in which there will be no payment. The tax rate is 22%. Compute the cost of this bond issue. Try 18% first. Narstek Inc. has decided to issue a 4-year maturity, 15% coupon bonds with a total nominal value of 300 million . The bonds were sold at a 10% discount and floatation costs amounted to 5% of the total nominal value. The principal will be repaid in equal installments after the first year in which there will be no payment. The tax rate is 22%. Compute the cost of this bond issue. Try 18% first.
Expert Answer:
Answer rating: 100% (QA)
To calculate the cost of the bond issue we need to find the total amount of cash outflows ie cost that Narstek Inc will incur The cost will be calcula... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The oil hedges that will ensure the price of a barrel of oil exports in 2015 cost 773 million dollars, a price much higher than the 543 million MXN pesos paid for this year, and will be supplemented...
-
The following nominal default-free bonds are traded in a well functioning capital market today: (step by step work, no excel) Bond Type face value coupon maturity price A Zero Coupon Bond 100 ------...
-
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $200,000 and has an estimated useful life of 8 years with zero salvage value . Management...
-
Suppose that S is regarded as a function of P and T. Show that TdS= CpdT- aTVdp. Hence, show that the energy transferred as heat when the pressure on an incompressible liquid or solid is increased by...
-
Obtain LVMH (Moet Hennessy Louis Vuitton)s 2017 annual report using the Investor Relations portion of its web site (do a Web search for Moet Hennessy Louis Vuitton investor relations). Required: 1....
-
Technical Float. What specifically does a floating rate of exchange mean? What is the role of government?
-
In what way can the use of ROI as a performance measure for investment centers lead to bad decisions? How does the residual income approach overcome this problem?
-
Which of the following statements is most accurate regarding an organization's finances and the budgeting process? a. Expenses can only be allocated to revenue-producing areas. b. Every department...
-
Answer the following questions related to the Docks Creek Land Company case presented in the chapter: 1. How does Robertsons role differ from Wisemans? 2. Are the professional standards applied...
-
Ethylene (C2H4) gas enters a steady flow combustion chamber at 25C and 1 atm at a rate of 0.50 kg/min. It is burned with 30 percent excess air that also enters at 25 C and 1 atm. After combustion,...
-
In Burditt v. U.S. Department of Health and Human Services 25 EMTALA was violated by a physician when he ordered a woman with dangerously high blood pressure (210/130) and in active labor with...
-
A firm has a following stockholders equity balances common stock part $400,000 paid in capital in excessive part $1,200,000 retained earnings $2 million and states where the firms legal capital is...
-
Phase I: The task for this phase is to develop a performance management plan for these jobs or groups of jobs. This should include identifying key performance areas, a defined process (i.e. who...
-
1. Research one article on F. Scott Fitzgerald and his life. Formulate. (write) a summary on the article and cite the article at the end (link). 2. Research one article on the 1920's or the American...
-
what is project status reporting Relevant points and Application of the concepts
-
Kirk Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Spock, Uhura, and Sulu. Each of these products can be sold as...
-
Choose two matrices A and B with dimension 2 x 2. Calculate det A, det B, and det (AB). Repeat this process until you are able to discover how these three determinants are related. Summarize your...
-
Presented next is information pertaining to Ward Specialty Foods, a calendar-year sole proprietorship, maintaining its books on the cash basis during the year. At year-end, however, Mary Ward's...
-
Refer to the financial statements and related notes of The Coca-Cola Company in Appendix A of this book. Required 1. What was the total income tax expense relating to income before income taxes for...
-
Using the present value tables, solve the following problems: Required 1. What is the present value on January 1, 2007 of $30,000 due on January 1, 2012 and discounted at 12% compounded annually? 2....
-
What is the popular saying on which the cash flow fade method is founded?
-
Should the buyers costs be separated from the target companys costs in the cost savings that come out of a merger of two companies?
-
What is the cost of capital equal to?
Study smarter with the SolutionInn App