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After your discussions, Jane decides to obtain additional funding through the issuance of $10,000,000 in bonds with a annual coupon (stated or contractual) rate of 6%, interest paid every six months (semi-annually) and a maturity date 10 years from date of issuance. After marketing the bonds to a select group of investors, Jane's investment bankers tell her they can sell the bonds, but the bonds must provide a market yield of 7% annually.
i. Will the bonds sell at a discount or premium?
ii. What is the amount of funds received from the investors?
iii. Explain in words how does selling the bonds at a discount or premium impact interest expense recorded on the Company's financial statements during the periods the debt is outstanding?
iv. What is the outstanding balance of the debt reflected on Company's balance sheet immediately following the 6th interest payment? (maturity is now in 7 years and assume no change in market yield of 7%)
a. Calculate the NPV of this investment opportunity. Should the company make theinvestment? b. Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.
Under normal conditions (60% probability). Plan A will produce $32,000 higher return than Plan B. Under tight money conditions (40% probability).
Evaluate the criteria or mechanisms used by the organisation for deciding how best to acquire capital and analyse the capital structure of the company.
Analyze a number of additional factors related to the home
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