Question: The Fire Keepers Casino is in the process of issuing a
The Fire-Keepers Casino is in the process of issuing a 25-year, 9% coupon (paid semi-annually) AA2-rated corporate bond with $1000 par value. If by the time the bonds receive SEC clearance, the market yield on this bond goes to 9.35%, and the company sells 25000 of these bonds with the help of an investment banker who charges them a commission rate of 2.5% on the proceeds, what will the total proceeds be for the issuing company, and what is the cost of these bonds to the firm in terms of the cost of capital? What are the firm’s future cash obligations?
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