CMS Corporation's balance sheet as of today is as follows
Long-term debt (bonds, at par) $10,000,000
Preferred stock $2,000,000
Common stock ($10 at par) $ 10,000,000
Retained earnings $4,000,000.
Total debt and equity $26,000,000
The bonds have a coupon rate of 4.0%, payable semi-annually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds are now sold below par. What is the current market value of the company's debt?

Answer rating: 100% (QA)

First we need to calculate the current market value of the bonds Since the bonds are sold below par ... View the full answer