Sincere stationary corporation needs to raise $450,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 12 percent and a maturity of 19 years. The investors require a rate of return of 8 percent.
A) What is the market value of the bonds?
B) What will the net price be if floatation costs are 9 percent of the market price?
C) How many bonds will the firm have to issue to receive the needed funds?
D) What is the firm's after-tax cost of debt if its average tax rate is 25 percent and its marginal tax rate is 33 percent?