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Company's long-term debt is selling for $900 per bond, with the tax rate of 40%. These...

Company's long-term debt is selling for $900 per bond, with the tax rate of 40%. These semiannual bonds have 10 years to maturity and 8% annual coupon rate with semiannual payment frequency. How costly is it for this company to issue new bonds? Assume par value of 1,000.

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Answer #1
                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =10x2
900 =∑ [(8*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^10x2
                   k=1
YTM% = 9.58
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