​(Cost of debt​) Sincere Stationery Corporation needs to raise​$750,000 to improve its manufacturing plant. It has decided toissue a ​$1,000 par value bond with an annual coupon rate of 16percent and a maturity of 15 years. The investors require a rate ofreturn of 8 percent.
a. Compute the market value of the bonds.
b. What will the net price be if flotation costs are
1111
percent of the market​ price?
c. How many bonds will the firm have to issue to receive theneeded​ funds?
d. What is the​ firm's after-tax cost of debt if its average taxrate is 25 percent and its marginal tax rate is
3737
​percent?
