The market value of bonds.

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Answer 1

Question

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

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Sincere Stationary Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate 10.0 percent with interest paid semiannually and a 10-year maturity. Investors require a return of 9.0 percent. A. Compute the market value of the bonds B. How many bonds will the firm have to issue to receive the needed funds C. What is the firms after-tax cost of debt if the firms tax rate is 34 percent

A company needs to raise $20 million and is considering issuing 5-year bonds for this purpose. Assume the required return on the bond issue will be 10 percent, and the company is evaluating two-issue alternatives: A semi-annual coupon bond with a 6 percent coupon rate and a zero-coupon bond. The tax rate is 35 percent. How many of the coupon bonds would you need to issue to raise the $20 million and how many of the zeroes need to be raised?In 6 years, what will the company’s repayment be if you issue the coupon bonds? What if you issue the zeroes?

Answer 2

Question

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

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Answer 3

Question

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

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Answer 4

Question

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

Expert Solution & Answer

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Answer 5

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

Answer 6

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

Answer 7

Chapter 9, Problem 12SP

a)

Summary Introduction

To determine: The market value of bonds.

Answer 8

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

Answer 9

b)

Summary Introduction

To determine: The net price when the floatation cost is market price’s 10.5%.

Answer 10

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

Answer 11

c)

Summary Introduction

To determine: The number of bonds company have to issue to receive required funds.

Answer 12

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

Answer 13

d)

Summary Introduction

To determine: The company’s after tax cost of debt.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 9 - Define the term cost of capital.Ch. 9 - Prob. 2RQ Ch. 9 - Why do firms calculate their weighted average cost...Ch. 9 - Prob. 4RQ Ch. 9 - Prob. 5RQ Ch. 9 - Prob. 6RQ Ch. 9 - Prob. 7RQ Ch. 9 - Prob. 1SP Ch. 9 - Prob. 2SP Ch. 9 - (Cost of equity) In the spring of 2018, the Brille...

The market value of bonds.

Solution Summary: The author explains how to determine the market value of bonds, the net price, and the after-tax cost of debt.

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To determine: The market value of bonds.

To determine: The net price when the floatation cost is market price’s 10.5%.

To determine: The number of bonds company have to issue to receive required funds.

To determine: The company’s after tax cost of debt.

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Chapter 9 Solutions