Please correct answer and don't use hand rating Andrew Industries is contemplating issuing a 30-year bondwith a coupon rate of 7.88 % (annual coupon payments) anda face value of $1 comma 000. Andrew believes it can get arating of A from Standard and Poor's. However, due to recentfinancial difficulties at the company, Standard and Poor's iswarning that it may downgrade Andrew Industries bonds toBBB Yields on A - rated, long-term bonds are currently7.38 %, and yields on BBB rated bonds are 7.78 %.a. What is the price of the bond if Andrew maintains the Arating for the bond issue?b. What will the price of the bond be if it is downgraded?

Okay, let's solve this problem step by step. We'll use the bond pricing formula to calculate the…

Answered: Andrew Industries is contemplating…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter22: Corporations: Bonds

Section: Chapter Questions

Problem 1CE

See similar textbooks

Similar questions

Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7.15% (annual coupon payments) and a face value of $1,000. Andrew believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Andrew Industries' bonds to BBB. Yields on A-rated, long-term bonds are currently 6.59%, and yields on BBB-rated bonds are 6.84%. a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? b. What will be the price of the bond if it is downgraded?
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 5.09% (annual coupon payments) and a face value of $1,000. Andrew believes it can get a rating of A from Standard and Poor's. However, due to recent financial difficulties at the company, Standard and Poor's is warning that it may downgrade Andrew Industries bonds BBB. Yields on A-rated, long-term bonds are currently 4.59%, and yields on BBB-rated bonds are 4.99%. a. What is the price of the bond if Andrew maintains the A rating for the bond issue? b. What will the price of the bond be if it is downgraded?
Andrew Industries is contemplating issuing a 30-vear bond with a coupon rate of 7.13% (annual coupon payments) and a face value of $1,000. Andrew believes it can get a rating of A from Standard & Poor's. However, due to recent financial difficulties at the company, Standard & Poor's is warning that it may downgrade Andrew Industries' bonds to BBB. Yields on A-rated, long-term bonds are currently 6.49%, and yields on BBB-rated bonds are 6.87%. a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? b. What will be the price of the bond if it is downgraded? a. What is the price of the bond if Andrew Industries maintains the A rating for the bond issue? If Andrew maintains the A rating for the bond issue, the price of the bond is S. (Round to the nearest cent.) b. What will be the price of the bond if it is downgraded? If it is downgraded, the new bond's price will be $. (Round to the nearest cent.)
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7 18% (annual coupon payments) and a face value of $1,000 Andrew believes it can get a rating of A from Standard & Poor's However, due to recent financial cues at the company, Standard & Poor's is waning that it may downgrade Andrew industres bonds to 608 Yields on Araled, kong tem bonds are currendy 6 49% and yelds on BBB-rated bonds are 5.82% Wha What will be the price of the bond e price of the bond Andrew lodusies martans the Arating for the bond downgrade What is the price of the bond if Andrew induties mariens Pe Arating for the bend Andre main the Araling for the bond issue, the price of the bond is found to the nearest cent)
Do not copy from other source Assume that the Blackmores Group would like to replace its bank loan facilities (2019) with a new issuing of bonds. Assume that the issue will have a coupon rate of 1.5% with a 10-year maturity. Assume these are semi-annual coupon bonds and each has a face value of $1.000 and the required rates of return for similar bonds in the market is 2.5%. What would be the issuing price of these bonds? How many bonds Blackmores will have to issue in order to replace its bank facilities?
Octopus Transit has a $1,000 par value bond outstanding with 10 years to maturity. The bond carries an annual interest payment of $104, payable semiannually, and is currently selling for $1,105. Octopus is in a 35 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar. a. Compute the yield to maturity on the old issue and use this as the yield for the new issue. (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Yield on new issue % b. Make the appropriate tax adjustment to determine the aftertax cost of debt. (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Cost of debt %
None
A 9-year bond of a firm in severe financial distress has a coupon rate of 14% and sells for $940. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. Required: What are the stated and expected yields to maturity of the bonds? The bond makes its coupon payments annually.
A 10-year bond of a firm in severe financial distress has a coupon rate of 13% and sells for $880. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the originally contracted amount. The firm can handle these lower payments. What is (a) the stated and (b ch. 14 - Problems yield to maturity of the bonds? The bond makes its coupon payments annually. (Do not round intermediate calculations. Round your answers to 3 decimal places.)Stated yield to maturity____Expected yield to maturity____
Tom Corp.'s bonds currently sell for $880. They have a 6.5% semiannual coupon rate and a 15-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return (annual) should an investor expect to earn if he or she purchases these bonds?
Baxter Co. wants to issue new 17-year bonds for some much-needed expansion projects. The company currently has 9 percent coupon bonds on the market that sell for $1,070, make semiannual payments, and mature in 17 years. Both bonds have a par value of $1,000. What coupon rate should the company set on its new bonds if it wants them to sell at par? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Coupon rate %
KIC Inc. plans to issue $7.2 million of bonds with a coupon rate of 16 percent paid semiannually and 36 years to maturity. The current one-year market interest rate on these bonds is 15 percent. In one year, the interest rate on the bonds will be either 18 percent or 9 percent with equal probability. Assume investors are risk neutral. a. If the bonds are non-callable, what is the price of the bonds today? (Do not round Intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Price of the bonds $ $3,799,246.63 b. If the bonds are callable one year from today at $1,575, will their price be greater or less than the price you computed in part (a)? Greater than Less than c. If the bonds are callable one year from today at $1,575, what is the current price of the bond? (Do not round Intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit $ sign in your response.) Current…

SEE MORE QUESTIONS

Recommended textbooks for you

College Accounting, Chapters 1-27

Accounting

ISBN:

9781337794756

Author:

HEINTZ, James A.

Publisher:

Cengage Learning,

College Accounting, Chapters 1-27

Accounting

ISBN:

9781337794756

Author:

HEINTZ, James A.

Publisher:

Cengage Learning,

SEE MORE TEXTBOOKS