MS Corporation's balance sheet as of today is as follows: Long-term debt (bonds, at par)$10,000,000 Preferred stock2,000,000
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MS Corporation's balance sheet as of today is as follows:
Long-term debt (bonds, at par)$10,000,000
Preferred stock2,000,000
Common stock ($10 par)10,000,000
Retained earnings4,000,000
Total debt and equity$26,000,000
The bonds have a 6.1% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?
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