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NEED DONE ASAP - FINANCE

FINANCE 3 - DUE ASAP

(Cost of debt) Sincere Stationery Corporation needs to raise $531,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 10.1 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.7 percent.

  1. Compute the market value of the bonds.
  2. How many bonds will the firm have to issue to receive the needed funds?
  3. What is the firm's after-tax cost of debt if the firm's tax rate is 32 percent?
Answer
Submitted by knickhelp on Wed, 2017-01-11 12:08
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Bond xxxxx = xxxxxxxx nper,pmt,fv)

Nper (indicates xxx xxxx xxxxxx period) = xxxx = 30

PV xxxxxxxxxx the xxxxxx x x

xxx xxxxxxxxx the semi xxxxxx payment) x xxxxxxxxxxxxxx = 50.5

xx xxxxxxxxxx xxx xxxx value) = xxxx

xxxx xxxxxxxxxx Half xxxx YTM) x 8.7%*1/2 x 4.35%

xxxx xxxxx x xxx xxxxxxxxxxxxxxxxxxx

Bond Value x xxx1116.06

 

b. xxx xxxx xxxxx xxxx xxx firm have xx xxxxx xx receive xxx needed funds?

xx of Bond = 531000/1116.06

No of xxxx x xxxxxx

No of xxxx x 476 xxxxxx

 

c. What xx xxx xxxxxx after-tax cost xx xxxx if xxx xxxxxx tax rate is 32 percent?

xxxxxx xxxxxxxxx xxxx xx xxxx = Before xxx xxxx xx xxxxxxxxxxx rate)

xxxxxx xxxxxxxxx cost of xxxx = 8.7%*(1-32%)

Firm's after-tax xxxx of debt x xxxxx

xx


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Answer
Submitted by finance Tutor on Wed, 2017-01-11 12:06
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finance 3

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Sheet1

xxxxxxxxxxxxxxxxxx
xxxxx of debt) Sincere Stationery xxxxxxxxxxx xxxxx to xxxxx $531,000 to improve xxx xxxxxxxxxxxxx plant. It has decided to issue x $1,000 xxx xxxxx bond xxxx xx annual coupon xxxx of xxxx xxxxxxx xxxx interest paid xxxxxxxxxxxx and x 15-year maturity. Investors require x rate xx return xx xxx xxxxxxxx
a. Compute xxx market value of xxx bonds.
xxxxxx xxxx xxxxxx
Par xxxxx xx bond$1,000
Couponsxxxxxxx
Required rate of return xxxxx
Market xxxxx xx bond =xxxxxxx1160.9195402299
xxxx xx xxxxxx
xxxxxx xxxxx xx xxxx x x xxxxxxxx
b. How xxxx xxxxx xxxx the xxxx have xx xxxxx to xxxxxxx the needed funds?
xxxxxx needed to xxxxx $531,000
xxx xxxxx xxx xxxx$1,000
xxx
xxxxx to be issuedxxx
c. xxxx is the xxxxxx after-tax cost xx debt xx xxx xxxxxx xxx rate xx xx xxxxxxxx
Coupn xxxx xxxxxx
xxx ratexxx
After tax xxxx xx debtxxxxx


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