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You learned how to value a basic bond in Chapter 8 The difference here is that...

You learned how to value a basic bond in Chapter 8 The difference here is that the company is considering a issue of new bonds. There are costs involved in issuing bonds You will need to adjust the price of the new issue by subtracting the issuing fees. Example A firm can sell a 20-year, $1000 par value, 9% bond for $980. A flotation cost of 2% of the face value would be required in addition to the discount of $20. Compute the rate of this bond. Note: The $20 discount has already been added. The discount is what brought the price down from $1000 to $980. Debt NPER 20 <

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Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

COST OF DEBT = 9.22%

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