Posted by dpwnc on .
1) A company wishes to issues bonds with a coupon rate of 5%. The company wishes to raise 100 million dollars net of commissions (5% of total sales). Each bond has a face value of $1,000 and matures in 10 years. Interest is to be paid semi-annually. Using the following conditions, please determine how many bonds the company has to sell in order to raise the necessary capital:
a. 8% market
b. 5% market
c. 4% market
If the company has an effective income tax rate of 30%, how does this influence the decision making? Be specific and show calculations. What would be the effective after tax interest rate? What critical ratios does the issues of bonds change and how? You must use excel and the formula menu for the time-value calculation.