Finance Homework Question?

Finance Homework Question?
You need to raise $4.5 million for company expansion and you expect that 5-year zero coupon bonds can be sold at a price of $567.44 for each $1,000 bond.

Q1) How many $1,000 par value zero coupon bonds would your company have to sell to raise the needed $4.5 million?

Q2) What will be the burden of this bond issue on the future cash flows generated by your company? What will be the annual debt service cost?

Q1) 7,931. $4,500,000/$567.44 = 7930.4 (round up). Assumes no transaction fees.

Q2) The zero-coupon bond accrued interest at 12% per annum (567.44/1000^(1/5)-1). The annual debt service can be accrued at $86.512 per year [(1000-567.44)/5) per bond. Just multiply by 7931 to get the total burden per year ($686,126.67). Since it is zero coupon, there are no cash flows until year five, when the cash flows will be negative $4.5m

Tags

　　Easy Money 　　Easy Investing 　　Earn Money 　　Direct Investment 　　Debt Financing 　　Capital Investment 　　Business Investment 　　Business financing

Related information

What are some good ways to better manage my finances?

do a budget which should include your daily, weekly, monthly, etc. expenses. to get a good idea as to how much you spend. make this your budget and stick to it. create an emergency set aside in cas...

Finance Question, please help?

You are taking a significant risk when you post homework questions here, as you have no idea whether anyone who answers is academically gifted or not (i.e. a person can be very successful in world ...

Why are people so bad at managing their finances?

Certainly, a good share of the blame lies with consumers who appear to have absolutely no willpower or common sense. If you spend more than you earn, then of course your debt will never stop pilin...

I filed bankruptcy a year ago need help with finding a credit agency to loan money ......?

...

Faster credit recovery!?

get some credit cards in his name, and use them, to about 50% of their limit, and pay them off each month, contact your credit card companies and ASK them to report your positive credit behavior to...

Accounting Help on this ? please?

c. Issuing debt

...

Can I buy a house? What should I look for?

You COULD swing it- IF you're careful. Get at LEAST $10K together for a Downpayment; shoot for a 30 year mortgage (you're young enough to go THAT route); and WHATEVER you do- apply for a ...

Can someone please help w/these finance questions?

All true

...