Question cost of debt sincere stationery corporation needs, Ask an Expert

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Question: (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 14 percent and a maturity of 10 years. The investors require a rate of return of 9 percent.

a. Compute the market value of the bonds.

b. What will the net price be if flotation costs are 10.5percent of the market? price?

c. How many bonds will the firm have to issue to receive the needed? funds?

d. What is the? firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 34 percent?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92579435

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