Practice Question $3$

Ewing Energy is in the process of issuing a $20-$year, $8\mathrm{.}75\%$ coupon $($paid semi$-$annually$)$

AA$2-$rated corporate bond with $$1000$ par value. If by the time the bonds receive SEC

clearance, the market yield on this bond goes to $9\mathrm{.}05\%,$ and the company sells $35,000$

of these bonds with the help of an investment banker who charges them a commission

rate of $2\mathrm{.}75\%$ 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? SHOW ALL WORKING AND EXPLANATIONS