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9-10 / 9-9 (cost of debt) Sincere stationery corp needs to

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9-10 / 9-9 (cost of debt) Sincere stationery corp needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 per value bond with a 14 percent annual coupon rate and a 10 year maturity. The investors require a 9 percent rate of return.

a. rework problem as follows: Assume an 8 percent coupon rate. What effect does changing the coupon rate have on the firm's after tax cost of capital?

(Cost of dept) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 14 percent annual coupon rate and a 10 year maturity. The investors require a 9 percent rate of return.

a. Compute the market value of the bonds. b. What will the net price be if flotation costs are 10.5 percent of the market price? c. How many bonds will the firm have to issue to receive the needed funds? d. What is the firm’s after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 34 percent?

And

9-10

a. rework problem as follows: Assume an 8 percent coupon rate. What effect does changing the coupon rate have on the firm's after tax cost of capital?

(Cost of dept) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 14 percent annual coupon rate and a 10 year maturity. The investors require a 9 percent rate of return.

a. Compute the market value of the bonds.

PMT

140

NPER

10

FV

1000

Rate

9.00%

Value

$1,320.88

b. What will the net price be if flotation costs are 10.5 percent of the market price?

Net Price = 1320.88*(1-.105) =$1182.19

c. How many bonds will the firm have to issue to receive the needed funds?

Number of Bonds = 500000/1182.19 = 423 Bonds

d. What is the firm’s after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 34 percent?

a. rework problem as follows: Assume an 8 percent coupon rate. What effect does changing the coupon rate have on the firm's after tax cost of capital?

Customer:replied 5 years ago.

Linda This was the problem for 9-9 below and 9-10 questions are

a. rework problem as follows: Assume an 8 percent coupon rate. What effect does changing the coupon rate have on the firm's after tax cost of capital?

B. I see the answer for this!!

9-9 (cost of debt) Sincere stationery corp needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 per value bond with a 14 percent annual coupon rate and a 10 year maturity. The investors require a 9 percent rate of return.

Is question 9-9 as I have specified below or only as given above by you.

(Cost of dept) Sincere Stationery Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 14 percent annual coupon rate and a 10 year maturity. The investors require a 9 percent rate of return.

a. Compute the market value of the bonds. b. What will the net price be if flotation costs are 10.5 percent of the market price? c. How many bonds will the firm have to issue to receive the needed funds? d. What is the firm’s after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 34 percent?