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Problem 1: The company LMI Ld specialized in electronics. LMI is considering issuing $1 million of 5-year bonds at a price of $1,000, with a coupon rate of 5%. Issuance costs amount to 2%. Income tax rate is of 40%. Can you write the equation showing the link between the cost of this bond at issuance and the future cash-flows on the bond? Can you calculate the internal rate of return ?

Reference no: EM132755757

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