Imagination Dragons Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 20-year zero coupon bonds with a par value of $1,000 each to raise the money. The required return on the bonds will be 11 percent. Assume semiannual compounding periods.a.What will these bonds sell for at issuance?b.Using the IRS amortization rule, what interest deduction can the company take on these bonds in the first year? In the last year? c.Repeat part (b) using the straight-line method for the interest deduction.

Zeeo coupon bonds :- Zero coupon bonds are bonds that do not pay interest during the life of the…

Answered: Imagination Dragons Corporation needs…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 17P

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Imagination Dragons Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 20-year zero coupon bonds with a par value of $1,000 each to raise the money. The required return on the bonds will be 11 percent. Assume semiannual compounding periods.