Question: Compute the cost of a 16% coupon, 4 year maturity bond issue of 600.000. The bonds were sold at 8 % discount and the flotation

Compute the cost of a 16% coupon, 4 year maturity bond issue of 600.000. The bonds were sold at 8 % discount and the flotation costs amounted to 5 % of total nominal value. Repayment will be made in equal instalments after a year of nonpayment. The Corporation tax rate is 22 %. (Start with 18 %)

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There will be no payment in the first year so the year 1 cash flow is 0 Repayments will be in equal ... View full answer

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