Q5Currently, Bima Industries can sell 15-year, RM1,000-par-value bonds paying annualinterest at a 12% coupon rate. As a result of current interest rates, the bonds can be soldfor RM1,010 each; flotation costs of RM30 per bond will be incurred in this process.The firm is in the 40% tax bracket.(a)Calculate the net proceeds from the sale of the bond.(b)(c)Prepare the cash flows from the firm's point of view over the maturity of the bond.Estimate the following using the approximation formula;(i)before-tax cost of debt.(ii)after-tax costs of debt.

Bonds are sources for funding over the long period of time for companies. They carry the annual…

interest at a 12% coupon rate. As a result of current interest rates, th for RM1,010 each; flotation costs of RM30 per bond will be incum The firm is in the 40% tax bracket. (a) Calculate the net proceeds from the sale of the bond. (b) (c) Prepare the cash flows from the firm's point of view over the m Estimate the following using the approximation formula; (i) before-tax cost of debt.

interest at a 12% coupon rate. As a result of current interest rates, th for RM1,010 each; flotation costs of RM30 per bond will be incum The firm is in the 40% tax bracket. (a) Calculate the net proceeds from the sale of the bond. (b) (c) Prepare the cash flows from the firm's point of view over the m Estimate the following using the approximation formula; (i) before-tax cost of debt.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Currently, Warren Industries can sell 20-year, $1,000-par-valuebonds paying annual interest at a 14% coupon rate. Because current market rates for similar bonds are just under 14%, Warren can sell its bonds for $960 each; Warren will incur flotation costs of $35 per bond. The firm is in the 22%tax bracket. a. Find the net proceeds from the sale of the bond, Nd. b. Calculate the before-tax and after-tax costs of debt.
GT Cap. Corp. will be issuing 5-year P20,000,000-face value bonds at an issue price equal to face. It has a nominal interest rate of 8%, due semi-annually. If it would incur issuance cost of P600,0000 and the tax rate is 30%, what is the effective cost of the bonds using the YTM formula?
1) Your firm wishes to issue a 20-year bond, an annual coupon of 6%, and the price has been determined to be RM880. The floatation cost of the issuance is 2% of the selling price. The tax rate is 24%. a) The net selling price is RM________. b) Annual YTM is ________% c) After tax cost of debt is ______% Answer by using formula not a Excel don't use chatgpt
Doha plc has some surplus funds that it wishes to invest in bonds. The company requires a return of 15% on bonds, and the finance director has asked you to analyse whether it should invest in either of the following bonds that are available:Company A: Expected profit 12% bonds, redeemable at par at the end of two more years, with a current market value of QAR 95 per QAR 100 bondCompany B: Expected profit 8% bonds, redeemable at QAR110 at the end of two more years, with a current market value of QAR 95 per QAR 100 bonda. Calculate the expected value (price) of the two bonds and evaluate if either offer an appropriate return for Doha Plc.b. Critically evaluate what would be the impact on the price of bonds if Doha Plc reduces their required return.c. Critically evaluate and discuss the factors that should be considered by the directors of a company when choosing whether to use debt or equity finance for a new projectd. Recently one director has attended a finance conference, on their…
DEBT: The firm can sell a 12‑year, 7%, P1,000 par value share for Php 960. A flotation cost of 2% of the face value would be required upon the issuance of the bond. Additionally, the firm's marginal tax rate is 40 percent. *Using the approximation method, what is the after-tax cost of debt?
Choose the correct answer from followings: Shelly Ltd is planning to expand its business by issuing 15-year zero coupon bonds with a face value of $1,000. If the market interest rate is 8% per annum, compounded semi-annually, what will be the price at which you will be willing to purchase these bonds? a. $866 b. $308 c. $558 d. $803
CG Forest and Paper LTD. raises capital; by selling 5,000,000 worth of debt with flotation xost equal to 3% of its par value. If the debt matures in 15 years and has coupon rate of 6% (paid annually).What is the bond's YTMSubject: Financial Accounting
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A company must make a payment of $2500 in 5 years. Four-year zero coupon bonds and seven-year zero coupon bonds are available for investment. These bonds could be purchased in any quantity and the yield rate is 3% effective. Let A and B be the face values of the 4-year and 7-year zero-coupon bonds, respectively, that are purchased to satisfy full immunization against any changes in interest rates. Find A. Possible Answers A 1262 1431 C 1618 D 1725 E 1962
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K (Cost of debt) Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 15 years. Investors are willing to pay $965 for the bond. Flotation costs will be 12 percent of market value. The company is in a 39 percent tax bracket. What will be the firm's after-tax cost of debt on the bond? The firm's after-tax cost of debt on the bond will be% (Round to two decimal places.)

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