After the successful offering of shares to the public through the company’s IPO ten years ago, PT. KFC is planning their first issuance of corporate bonds for the total amount of Rp. 500 billion with a maturity of 5 years. The funds raised from the bonds will be used to settle the company’s outstanding bank loans which are maturing early next year. In agreement with the underwriter the bonds will have minimum denomination of Rp. 50 million and coupon rate of 10%, payable semi-annually. As an investor, your required rate of return is 8%, you are considering investing in the bond but is still unsure if you are able to get the required return. 

a. If PT. KFC’s bonds are sold at the price of Rp. 47.000.000,- will it be worthwhile for you to invest? 

b. From a different perspective, please perform the assessment for three groups of Institutional investors which are also interested to purchase PT KFC bonds, but each has their own required rate of returns, namely set at rate of 7%, 10% and 15% respectively, what will it be the individual value of the bonds from the point of assessment of each of these three groups of institutional investors? Explain the results of your calculation accordingly.

Answer rating: 100% (QA)

Part a We can find the rate of return offered by the bond using the RATE function of excel or financ... View the full answer