Trinjam Limited wants to expand operations of its Port of Spain Business to San Fernando. To achieve this desired objective, Trinjam Limited must raise $75 million dollars and is seeking to issue a 25-year bond for this purpose. Assume the required return on your bond issue will be 7 percent. You’re evaluating two possible financing scenarios; 1. An 8.50 percent monthly coupon bond 2. A Zero coupon bond. Your company’s tax rate is 25 percent. a) How many of the coupon bonds will Trinjam need to issue to raise the $75 million dollars? How many Zero coupon bonds would they need to issue?
Trinjam Limited wants to expand operations of its Port of Spain Business to San Fernando. To achieve this desired objective, Trinjam Limited must raise $75 million dollars and is seeking to issue a 25-year bond for this purpose. Assume the required return on your bond issue will be 7 percent. You’re evaluating two possible financing scenarios; 1. An 8.50 percent monthly coupon bond 2. A Zero coupon bond. Your company’s tax rate is 25 percent. a) How many of the coupon bonds will Trinjam need to issue to raise the $75 million dollars? How many Zero coupon bonds would they need to issue?
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 16P
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Trinjam Limited wants to expand operations of its Port of Spain Business to San Fernando. To achieve this desired objective, Trinjam Limited must raise $75 million dollars and is seeking to issue a 25-year bond for this
purpose. Assume the required return on your bond issue will be 7 percent.
You’re evaluating two possible financing scenarios;
1. An 8.50 percent monthly coupon bond
2. A Zero coupon bond.
Your company’s tax rate is 25 percent.
a) How many of the coupon bonds will Trinjam need to issue to raise the $75 million dollars? How many Zero coupon bonds would they need to issue?
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