Notable nothings plans to issue new bonds with the same yield as its existing bonds. the existing bonds have a coupon rate of interest equal to 5.6 percent (semiannual interest payments), 12 years remaining until maturity, and a $1,000 maturity value; they are currently selling for $918 each. (a) if notable issues new bonds today, what will its before-tax cost of debt be? (b) what will be its before-tax cost of debt if the price of its existing bonds is $730 when notable issues the new bonds
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Notable nothings plans to issue new bonds with the same yield as its existing bonds. the existing bonds have a coupon rate of interest equal to 5.6 percent (semiannual interest payments), 12 years remaining until maturity, and a $1,000 maturity value; they are currently selling for $918 each. (a) if notable issues new bonds today, what will its before-tax cost of debt be? (b) what will be its before-tax cost of debt if the price of its existing bonds is $730 when notable issues the new bonds
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