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How much of the issue will consist of flotation costs

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Reference no: EM132697227

Problem - Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs to support future operations. MM's investment banker will charge 2.5 percent of the total amount issued to help MM raise the funds. In addition, MM will incur other costs associated with the issue that total $500,000. The market value of each bond at issue time will be $1,000. How many bonds must MM sell to net $175 million after flotation costs? Assume that fractions of bonds cannot be issued. Show how much of the issue will consist of flotation costs and how much MM will receive after flotation costs are paid.

Reference no: EM132697227

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