Foundations Of Finance
Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

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(Cost of​ debt)   Sincere Stationery Corporation needs to raise ​$500,000 to improve its manufacturing plant. It has decided to issue a ​$1,000 par value bond with an annual coupon rate of 10 percent with interest paid semiannually and a 10​-year maturity. Investors require a rate of return of 9 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed​ funds? c. What is the​ firm's after-tax cost of debt if the​ firm's tax rate is 34 ​percent?
(Cost of debt) Gillian Stationery Corporation needs to raise $610,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 7.9 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 10.7 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent? a. The market value of the bonds is $ (Round to the nearest cent.) b. The number of bonds that the company needs to sell isbonds. (Round up to the nearest integer.) c. The firm's after-tax cost of debt is. (Round to two decimal places)
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