Question

Cost of debt.   Kenny Enterprises has just issued a bond with a par value of ​$1,000​,...

Cost of debt.   Kenny Enterprises has just issued a bond with a par value of ​$1,000​, a maturity of twenty​ years, and a coupon rate of 8.7​% with semiannual payments. What is the cost of debt for Kenny Enterprises if the bond sells at the following​ prices? What do you notice about the price and the cost of​ debt? a.   ​$967.91 b.   ​$1,000.00 c.   ​$1,055.87 d.   ​$1,132.33 a.  What is the cost of debt for Kenny Enterprises if the bond sells at ​$967.91​? b.  What is the cost of debt for Kenny Enterprises if the bond sells at ​$1,000.00​? c.What is the cost of debt for Kenny Enterprises if the bond sells at ​$1,055.87​? nothingm​% ​ (Round to two decimal​ places.) d.  What is the cost of debt for Kenny Enterprises if the bond sells at ​$1,132.33​?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Coupon = 8.7%*1000/2 = 43.50
Par value = 1000
Number of Periods = 20*2 = 40
a ) Price = 967.91
Cost of Debt using excel function = 2*RATE(40,43.50,-967.91,1000) = 9.05%

b) Price = 1000
YTM and Coupon rate are same = 8.7%

c) Price = 967.91
​​​​​​​Cost of Debt using excel function = 2*RATE(40,43.50,-1055.87,1000) = 8.13%

d) Price = 1132.33
​​​​​​​Cost of Debt using excel function = 2*RATE(40,43.50,-1132.33,1000) = 7.42%

Please Discuss in case of Doubt

Best of Luck. God Bless
Please Rate Well

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Kenny Enterprises has just issued a bond with a par value of ​$1,000​, a maturity of...
Kenny Enterprises has just issued a bond with a par value of ​$1,000​, a maturity of twenty​ years, and a coupon rate of 7.3​% with semiannual payments. What is the cost of debt for Kenny Enterprises if the bond sells at the following​ prices? What do you notice about the price and the cost of​ debt? a.  ​$946.88 b.  ​$1,000.00 c.  ​$1,073.64 d.  ​$1, 239.11
Redd Industries has just issued a callable, $1000 par value, five-year, 5% coupon bond with semiannual...
Redd Industries has just issued a callable, $1000 par value, five-year, 5% coupon bond with semiannual coupon payments. The bond can be called at par in three years or anytime thereafter on a coupon payment date. If the bond is currently trading for $950.00, then its yield to maturity is closest to: Select one: A. 6.5% B. 6.18% C. 6.0% D. 6.8% Redd Industries has just issued a callable, $1000 par value, five-year, 5% coupon bond with semiannual coupon payments....
Several years ago Samuel Enterprises sold a $1,000 par value, 7% semi annual coupon bond that...
Several years ago Samuel Enterprises sold a $1,000 par value, 7% semi annual coupon bond that now has 20 years to maturity. The bond is noncallable and currently sells for $975. The company’s tax rate is 25%. What is Samuel Enterprises' after-tax cost of debt? a. 4.33% b. 6.22% c. 7.24% d. 5.43% e. 8.29%
1. A $1,000 par value bond was just issued with a 30 year maturity and a...
1. A $1,000 par value bond was just issued with a 30 year maturity and a 6% coupon rate. If an investor has a required return of 8%, how much should they pay for this bond? Make sure to include 2 decimals in your answer. 2. A $1,000 par value bond was originally issued with a 30 year maturity and a 9% coupon rate. 8 years have passed since the bond was issued and the bond now has 22 years...
Your firm has just issued a 20-year $1,000.00 par value, 10% annual coupon bond for a...
Your firm has just issued a 20-year $1,000.00 par value, 10% annual coupon bond for a net price of $964.00. What is the cost of debt that should be used when computing the Weighted Average Cost of Capital? The firm is in the 25% tax bracket.
A 20-year, semiannual coupon bond sells for $958.56. The bond has a par value of $1,000...
A 20-year, semiannual coupon bond sells for $958.56. The bond has a par value of $1,000 and a yield to maturity of 7.02 percent. What is the bond's coupon rate? A stock currently sells for $58. The dividend yield is 3.6 percent and the dividend growth rate is 4.9 percent. What is the amount of the dividend that was just paid?
Endicott Enterprises Inc. has twenty years remaining on Ghc 1,000 par value semiannual coupon bonds paying...
Endicott Enterprises Inc. has twenty years remaining on Ghc 1,000 par value semiannual coupon bonds paying a coupon of Ghc40. If the yield to maturity on these bonds is 6% per year, what is the current price?
TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was...
TCO D) A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 6% and the interest payments are made semiannually. What is its YTM? Show your work.
Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 15 years...
Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 15 years Coupon rate: 7 percent Semiannual coupon payments for questions a and b / Quarterly coupon payments for question c Calculate the price of this bond if the YTM is: a. 7 percent b. 9 percent c. 5 percent - can someone solve this without using excel please?? Thank you!
A 15-year, semiannual coupon bond sells for $985.72. The bond has a par value of $1,000...
A 15-year, semiannual coupon bond sells for $985.72. The bond has a par value of $1,000 and a yield to maturity of 6.57 percent. What is the bond's coupon rate?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT