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9 Jun 2018
Q- Suppose your company needs to raise $55 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent, and youâre evaluating two issue alternatives: A 7 percent semiannual coupon bond and a zero coupon bond. Your companyâs tax rate is 30 percent.
How many of the coupon bonds would you need to issue to raise the $55 million?
Number of coupon bonds- ?
How many of the zeroes would you need to issue? (Round your answer to 2 decimal places. (e.g., 32.16))
Number of zero coupon bonds- ?
In 25 years, what will your companyâs repayment be if you issue the coupon bonds? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Coupon bonds repayment- ?
What if you issue the zeroes? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Zeroes repayment- ?
c. Calculate the aftertax cash flows for the first year for each bond. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)
Coupon bonds (Click to select)InflowOutflow $ Zero coupon bonds (Click to select)InflowOutflow $
| Q- Suppose your company needs to raise $55 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent, and youâre evaluating two issue alternatives: A 7 percent semiannual coupon bond and a zero coupon bond. Your companyâs tax rate is 30 percent. |
| How many of the coupon bonds would you need to issue to raise the $55 million? |
| Number of coupon bonds- ? |
| How many of the zeroes would you need to issue? (Round your answer to 2 decimal places. (e.g., 32.16)) |
| Number of zero coupon bonds- ? |
| In 25 years, what will your companyâs repayment be if you issue the coupon bonds? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) |
| Coupon bonds repayment- ? |
| What if you issue the zeroes? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) |
| Zeroes repayment- ? |
| c. | Calculate the aftertax cash flows for the first year for each bond. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) |
| Coupon bonds | (Click to select)InflowOutflow | $ |
| Zero coupon bonds | (Click to select)InflowOutflow | $ |
Nelly StrackeLv2
11 Jun 2018