Reference no: EM132843880
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 7.1% 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. $7,189,038
b. $7,188,206
c. $7,189,454
d. $7,188,622
e. $7,189,869