What is the proxy for the sale of new bonds

Assignment Help Financial Management

Reference no: EM131994769

You are provided the following information:

Capital Structure:

Debt $ 60000

Equity $ 180000

The firm sold 50 year; $ 1000 face value, 5% bonds 10 years ago. These bonds trade at $ 930. You expect the yield on these bonds to be a good proxy for the cost of issuing new bonds.

The shares trade at $ 20; the growth rate is 6%. Dividends paid last year - $ 1.00.

The firm has a 30% tax rate.

Kemper, Goebel & Benkato, Investment Bankers have informed you that new shares can be sold with a 10% transaction cost.

New 50 year bonds can be sold. The firm can collect:

$ 0 -- $ 120000 6%

The firm added $ 180000 to retained earnings last year.

As the intern, compute the cost of capital {WACC} for the CFO.

Compute the yield till maturity on the old bonds. So, what is the proxy for the sale of new bonds?

Reference no: EM131994769

Questions Cloud

Critical values of t if the level of? significance : If, in a sample of n=16 selected from a normal? population, x¯=56 and S=20?; the critical values of t if the level of? significance, a,? is 0.05.

Describe the key symptoms and incubation period for illness : Describe the key symptoms and incubation period for the illness affecting the eleven blue men. Describe each step of an outbreak investigation as it pertains.

What is the bond current market price : The coupon interest rate is 9%; and the yield to maturity is 12%. What is the bond's current market price?

What does matter is how you can now better assess : How might you improve your active listening skills to prevent a similar situation from occurring in the future - What do you believe is the most common reason

What is the proxy for the sale of new bonds : Compute the yield till maturity on the old bonds. So, what is the proxy for the sale of new bonds?

Stands for dollar amount of interest : In simple interest formula I = PRT, I stands for dollar amount of interest. Suppose you borrow $3,000 at 7.25% interest for 14 months. What is maturity value?

How well prepared is your current or former employer : How well prepared is your current or former employer for an emergency? What are the strengths and weaknesses of their current emergency operations plan?

Why would the given question be important to others : Why is this question important to me? Why would this question be important to others? Which readings would best help me answer my questions?

What are the limitations of a voluntary approach : What are the advantages and limitations of a voluntary approach to protect private sector critical infrastructure?

User Account

All Pages