Suppose on January 1, 2021 you discover an exciting new remote working tool and need...
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Accounting
Suppose on January 1, 2021 you discover an exciting new remote working tool and need to raise $6 million to scale production for mass distribution. After consulting with your business partner, you decide to raise this money by issuing a bond. The investment bankers offer you two options:
Issue a 3-year, $6 million coupon bond at 8% with interest payments due annually on December 31 of each year
Issue a 3-year zero coupon bond
Suppose you decide to issue the coupon bond on January 1, 2021 when the market rate is 8%. How would your balance sheet be affected by:
The issuance of the bond?
Interest expense for the fiscal period ending December 31, 2021?
Repurchase of the bond on January 1, 2022, for $5.2 million.
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