Determining the market value of the bonds

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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% annual coupon rate and a 10 year maturity. The investors require a 9% rate of return.

(a) Compute the market value of the bonds.

(b) What will the net price be if floatation costs are 10.5% of the market price?

(c) What is the firm's after tax-cost of debt if the corporate tax rate is 34%?

Reference no: EM132504079

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