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Cost of debt. ?Dunder-Mifflin, Inc.? (DMI) is selling? 600,000 bonds to raise money for the publication...

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Finance

Cost of debt. ?Dunder-Mifflin, Inc.? (DMI) isselling? 600,000 bonds to raise money for the publication of newmagazines in the coming year. The bond will pay a coupon rate of12.8?% with semiannual payments and will mature in 30 years. Itspar value is $100.

What is the cost of debt to DMI if the bonds raise the followingamounts? (ignoring issuing? costs)?

a. ?$58,092,000? _______%? (Round to two decimal? places.)

b. ?$51,012,000?________%? (Round to two decimal? places.)

c. ?$63,114,000? ________ % (Round to two decimal? places.)

d. ?$74,796,000? ________%? (Round to two decimal? places.)

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Solution Amount raised cost of debt to DMI a 58092000 1323 b 51012000 1509 c 63114000 1215 d 74796000 1016 Working Notes cost of debt to DMI will be its annual YTM of bond a 58092000 As the bond is paying coupon semi annually its Ytm can be calculated by Excel or financial calculator No of period years to maturity x no of coupon in a year 30 x 2 nper N 60 Face value of bond FV 100 x 600000 60000000 Price of the bond PV 58092000 amount raised Semiannual Coupon amount PMT coupon rate x face value2 128 x 60000000 2 3840000 For calculation YTM by excel type    See Answer
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Cost of debt. ?Dunder-Mifflin, Inc.? (DMI) isselling? 600,000 bonds to raise money for the publication of newmagazines in the coming year. The bond will pay a coupon rate of12.8?% with semiannual payments and will mature in 30 years. Itspar value is $100.What is the cost of debt to DMI if the bonds raise the followingamounts? (ignoring issuing? costs)?a. ?$58,092,000? _______%? (Round to two decimal? places.)b. ?$51,012,000?________%? (Round to two decimal? places.)c. ?$63,114,000? ________ % (Round to two decimal? places.)d. ?$74,796,000? ________%? (Round to two decimal? places.)

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