XYZ Corp needs to raise $527,000. It has decided to issue a $1000 par value bond with an annual coupon rate of 10.7% with interest paid semiannually and a 15 year maturity. Investors require a rate of return of 8.1%.
a) Compute market value of bond
b) How many bonds will they have to issue to raise the needed funds. What is the firms after-tax cost of debt if firms tax rate is 34%.