Suppose your company needs to raise $30 million and you want to issue 30-year bonds for this purpose
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Suppose your company needs to raise $30 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 8%, andyou're evaluating two issue alternatives: an 8% semiannual coupon bond and a zero coupon bond. Your company's tax rate is 35%.
a) You will need to issue ? of the coupon bonds to raise the $30 million.
b) In 30 years, your company's repayment will be ?$ if you use coupon bonds
c) Your aftertax cash outflow for the first year will be ?$ if you issue coupon bonds?
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