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Suppose your company needs to raise $28 million and you want to issue 15-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you're evaluating two issue alternatives: an 8 percent annual coupon and a zero coupon bond. Your company's tax rate is 35 percent. In 15 years, what will your company's repayment be if you issue the coupon bonds? What if you issue the zeroes? (Assume annual compounding on the zero coupon bond).

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Financial Management, Finance

Category:- Financial Management
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