Lerner Corp. needs to raise $64 million for a new plant and they plan to...
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Lerner Corp. needs to raise $64 million for a new plant and they plan to issue 25-year bonds to pay for the project. The know the required return on the bond issue will be 5.2 percent, and they are evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 5.2 percent and a zero coupon bond. Both bonds will have a par value of $1,000. Assume the corporate tax rate is 25 percent. a-1. How many coupon bonds does the company need to issue to raise the $64 million? a-2. How many zeroes does the company need to issue to raise the same amount? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. In 25 years, what will the company's repayment be if they issue the coupon bonds? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b-2. What will the repayment be if the company issues zeroes? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) c. Calculate the aftertax cash flows for the first year for each alternative bond issue. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) a-1. Number of coupon bonds a-2. Number of zero coupon bonds b-1. Coupon bonds repayment b-2. Zeroes repayment c. Coupon bonds Zero coupon bonds
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