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Sincere Stationery Corporation needs to raise â$800000 to improve its manufacturing plant It has decided to issue a â$1000 par value bond with an annual coupon rate of 15 percent and a maturity

Sincere Stationery Corporation needs to raise ​$800,000 to improve its manufacturing plant. It has decided to issue a ​$1,000 par value bond with an annual coupon rate of 15 percent and a maturity of 18 years. The investors require a rate of return of 12 percent.

a.  Compute the market value of the bonds.

b.  What will the net price be if flotation costs are 12 percent 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 37 ​percent?

 

Aug 09 2020 View more View Less

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