Reference no: EM132954291
MS Corporation's balance sheet as of today is as follows:
Long-term debt (bonds, at par) $10,000,000
Preferred stock 2,000,000
Common stock ($10 par) 10,000,000
Retained earnings 4,000,000
Total debt and equity $26,000,000
Problem 1: The bonds have a 6.9% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the firm's debt?
Select the correct answer.
a. $7,074,326
b. $7,073,481
c. $7,074,748
d. $7,073,903
e. $7,075,170