Reference no: EM131865384
Suppose your company needs to raise $16 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 4 percent, and you're evaluating two issue alternatives: a 4 percent semiannual coupon bond and a zero coupon bond. Your company's tax rate is 32 percent.
a. You will need to issue ________ of the coupon bonds to raise the $16 million.
You will need to issue _____ of the zeroes to raise the $16 million. (Round your answers to the nearest whole number. (e.g., 32))
b. In 25 years, your company's repayment will be $__________ if you issue the coupon bonds. (Do not include the dollar sign ($).)
c. If you issue the zeroes, your company's repayment will be $_____. (Do not include the dollar sign ($). Do not round your intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))
d. Your aftertax cash outflow for the first year will be $_______ if you issue the coupon bonds, and a cash inflow of $______ if you issue the zeroes. (Do not include the dollar signs ($). Do not round your intermediate calculations. Round your answers to the nearest whole number. (e.g., 32))
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