CFIN -STUDENT EDITION-ACCESS >CUSTOM<
CFIN -STUDENT EDITION-ACCESS >CUSTOM<
6th Edition
ISBN: 9780357752951
Author: BESLEY
Publisher: CENGAGE C
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Chapter 3, Problem 10PROB
Summary Introduction

JRC needs $240 million to support operations. To raise the needed funds, the firm issued bonds at $1,000 each bond. The flotation cost is 4%. Calculate the number of outstanding bonds to be issued.

Debt financing is the process of raising debt capital by issuing shares to investors due to short-term need or long-term goal or for the future growth of the firm.

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Grand Energy Corporation (GE) plans to issue bonds to raise $299 million. Ge's Investment banker will charge 8 percent of the total amount issued to help raise the funds. The market value of each bond at issue time will be $1,000. How many bonds must GE sell to net $299 million after flotation costs? Assume that fractions of bonds cannot be issued. Round yout answer to the nearest whole number, bonds Show how much of the total amount issued will consist of flotation costs and how much GE will receive after flotation costs are paid. Enter your answers in dollars. For example, on answer of $2 million should be entered as 2,000,000, not 2. Round your answers to the nearest dollar Floation costs $ Net proceeds:
WonderWorld Widgets (WWW) needs to raise $75 million in debt. To issue thedebt, WWW must pay its underwriter a fee equal to 3 percent of the issue.The company estimates that other expenses associated with the issue will total$466,000. If the face value of each bond is $1,000, how many bonds must beissued to net the needed $75 million? Assume that the firm cannot issue a fractionof a bond (i.e., half of a bond)—only “whole bonds” can be issued.
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