Purchase Solution

Comparing Borrowing Costs

Not what you're looking for?

Ask Custom Question

Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year life. (2) A $50 million private placement with a large pension fund. Issuance costs are $500,000, the bond has a 9.25% annual coupon, and the bond has a 20-year life. Which alternative has the lower cost (annual percentage yield)?

Purchase this Solution
Solution Summary

Using an Excel 97-2003 spreadsheet, this solution illustrates how to compare the costs of two borrowing alternatives when each incurs flotation costs.

Solution Preview

This is really just a problem of find the rate where the present value is the NET proceeds, the ...

Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

View More Free Quizzes
Related BrainMass Solutions

  • Comparing borrowing costs - Stephens Security

    381588 Comparing Borrowing Costs - Stephens Security See the attached file. A2. (Comparing borrowing costs) Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue.

  • Lower Borrowing Cost.

    250229 Lower Borrowing Cost. (Comparing borrowing costs) Stephen Security has two financing alternative: (1) A publicly placed $50 million bond issues.

  • Stephens Security has two financing alternatives

    (Comparing borrowing costs) Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue.

  • Comparing borrowing costs - A2

    251656 Comparing borrowing costs - A2 Stephens Security has two financing alternatives (1) A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year life.

  • Comparing Borrowing Costs via Annual Percentage Yield

    265955 Comparing Borrowing Costs via Annual Percentage Yield Stephens Security has two financing alternatives: (1) A publicly placed $50 million bond issue.

  • Comparing borrowing costs

    272223 Comparing Borrowing Costs: Example Problem A company has two financing alternatives: (1) A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year life.

  • present value

    254969 Comparing the NPV of the Financial Costs and Benefits Brian and Allen are 30 years old with identical academic records and job history. Both currently have jobs paying $40,000 per year.

  • Which is true when accounts receivable are factored

    Financing costs are recognized at the time of the transaction. This is false.

  • Gardner Denver 10-K Report 2008

    What is the company doing to reduce costs? 6. Comparing 2008 to 2007, did sales decrease in both product segments? 7. Comparing 2008 to 2007, what accounted for the decrease in gross profit? 8.

View More Related Solutions