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Suppose the finance manager of ABC Company suggests either issuing bonds or shares to raise...

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Finance

Suppose the finance manager of ABC Company suggests either issuing bonds or shares to raise capital for the development of an environmental-friendly production technique. Assuming there is no fees or costs for the securities.

(ii) If ABC Company wants to issue 20-year zero coupon bonds to raise fund for development, suppose the par value of a 20-year zero coupon bond is $20,000, what is the intrinsic value of the bonds if required rate of return is 7.45%? Would it be worth to invest if the price of bond is $4,800? Explain.

(5 marks)

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