I am having trouble with step 2 getting the 18.77 in this problem. I am using a
ID: 2768572 • Letter: I
Question
I am having trouble with step 2 getting the 18.77 in this problem. I am using a BAII finance calculated. What am I doing wrong or what is my CF0 when plugging in the numbers. TAR Ticket peCH13 Probiem 3QP show all steps Question: Cost of Dettoympg Sports has two issues ofdett outstragOnea9%couponbond with atace valae of S20 mnon amahity of 10years and a yield to mut ty of 10% The coupons are pad arr The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 10% The tace value ofthe-is$25 maon.andthe issue sets tor 94% of par value Thetem's tax rale is 35% CHO XP ( a What is the before tax cost of debt for Olympkc? Step 1 of Thepenqueston based ontheconcept of cost of debt OOST OF DEBT, es he enedve rate of by the company to une debt inancing This also helps the investlors by giing an loa as to the reamess the company compared to others, because riskier companies generally have a higher cost of db The data given in the question i BONDI Face value 20 million Time-10 years Step 2 ofs payments of S 1800 000 0% of 20 maon, in year 1-9 Coupon payment plus redemption amount amounting to $ 21,000,000 in so yea Hence, the current bond price (D)wi be calculated by discounting the bond's cash ows at YTM L8OD.OD L.800000 L,o0. 110 0.1o) $ 18,771,08 1.1aExplanation / Answer
You dont need to use the CF0 formula here.
Enter PMT = 1,800,000
FV = 20,000,000 ; N =10; 1/Y = 10 and then press CPT and then PV which should show 18,771,086.
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