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You are asked to analyze the following potential bond issue & answer the following questions....

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Finance

You are asked to analyze the following potential bond issue & answer the following questions.
The bonds would be used to fund a $40,000,000 initiative for a company.
Years to maturity 25
Required return 5.25%
Amount needed 40,000,000
Face value $1,000
Coupon rate 5.75%
Tax rate 21.00%
Year bond is called 8
Spread above Treasury 0.40%
Treasury rate at call 4.80%
Treasury rate at call 6.20%
The firm is considering issuing either a coupon bond (info above) or a zero coupon bond.
The yield on either will be 5.25%. The face value is the same for both bonds.

What is Value of Coupon Bond ... I got -1068.74

What is Value of Zero Coupon Bond ... I got -278.26

How many of each bond would be needed to fund the firm's needs? (Coupon and Zero)

Coupon I got 40,000

Zero I got 143,750.45

How much would the principal repayment be for each bond issue at maturity?

If cash flow is not a concern for the firm which bond would you recommend?

If cash flow is a concern for the firm which bond would you recommend?

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