Question

global products plans to issue long term bonds to raise financial growth. he company has eisting bonds outstanding that are similar to the new ones its going to issue. Existing bonds have a fce value of $1000.00 to mature in 10 years, pay $60.00 interest annually and are currently selling for $1077.00 Global's marginal tax rate is 40%. What should be the coupon rate on the new bond issue and the after tax cost of debt?

Answer #1

ABC Ltd plans to raise $2 million to build a new
onion-processing factory. It will issue bonds with a term to
maturity of 12 years. The face value per bond will be $1,000 and
the coupon rate will be 7% per annum, paid semi-annually. Similar
corporate bonds are trading at a yield to maturity of 8% per annum,
compounded semi-annually. It is expected that these new bonds will
trade at this rate. How many bonds will ABC need to issue?...

Costly Corporation plans a new issue of bonds with a par value
of $1000, a maturity of 30 years, and an annual coupon rate of
13.0%. Flotation costs associated with a new debt issue would equal
8.0% of the market value of the bonds. Currently, the appropriate
discount rate for bonds of firms similar to Costly is 17.0%. The
firm's marginal tax rate is 30%. What will the firm's true cost of
debt be for this new bond issue?
18.48%...

Answer the following questions
Al Safa Inc. plans to issue new bonds to finance its new project.
In its efforts to price the issue, Al-Safa has identified a company
of similar risk with an outstanding bond issue that has an 8
percent coupon rate having a maturity of ten years. This firm's
bonds are currently selling for $1,091.96. If interest is paid
annually for both bonds, what must the coupon rate of the new bonds
be in order for the...

Costly Corporation plans a new issue of bonds with a par value
of $1000, a maturity of 37 years, and an annual coupon rate of
11.0%. Flotation costs associated with a new debt issue would equal
3.0% of the market value of the bonds. Currently, the appropriate
discount rate for bonds of firms similar to Costly is 9.0%. The
firm's marginal tax rate is 50%. What will the firm's true cost of
debt be for this new bond issue?
11.34%...

Clements Marshall Ltd plans to raise $2 million to build a new
onion-processing factory near Devonport in Tasmania. It will issue
bonds with a term to maturity of 12 years. The face value per bond
will be $1,000 and the coupon rate will be 7% per annum, paid
semi-annually. Similar corporate bonds are trading at a yield to
maturity of 8% per annum, compounded semi-annually. It is expected
that these new bonds will trade at this rate. How many bonds...

Thuddungra Turnips Ltd plans to raise $1.2 million to purchase
land and plant more crops of turnips. It will issue bonds with a
term to maturity of 15 years. The face value per bond will be
$1,000 and the coupon rate will be 8% per annum, paid
semi-annually. Similar corporate bonds are trading at a yield to
maturity of 9% per annum, compounded semi-annually. It is expected
that these new bonds will trade at this rate. If the total cost...

Suppose a firm wants to raise $12.7 million by issuing bonds. It
plans to issue a bond with the following characteristics:
Coupon rate: 6% APR
Yield to maturity: 7.6% APR
Coupons paid out semi-annually
Matures 20 years away from today
Face Value = $1,000
How many bonds does the firm need to issue? Round
to 2nd decimal point.

Boorowa Pastoral Ltd plans to raise $2.2 million to purchase
land the graze more merino sheep. It will issue bonds with a term
to maturity of 10 years. The face value per bond will be $1,000 and
the coupon rate will be 7.5% per annum, paid semi-annually. Similar
corporate bonds are trading at a yield to maturity of 9% per annum,
compounded semi-annually. It is expected that these new bonds will
trade at this rate. If the total cost of...

King Leopold Prawn Farming Ltd plans to raise $3 million to
build a new prawn farm near Broome in Western Australia. It will
issue bonds with a term to maturity of 15 years. The face value per
bond will be $1,000 and the coupon rate will be 8% per annum, paid
semi-annually. Similar corporate bonds are trading at a yield to
maturity of 10% per annum, compounded semi-annually. It is expected
that these new bonds will trade at this rate....

Clements Marshall Ltd plans to raise $2 million to build a new
onion-processing factory near Devonport in Tasmania. It will issue
bonds with a term to maturity of 12 years. The face value per bond
will be $1,000 and the coupon rate will be 7% per annum, paid
semi-annually. Similar corporate bonds are trading at a yield to
maturity of 8% per annum, compounded semi-annually. It is expected
that these new bonds will trade at this rate. How many bonds...

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