Transcribed Image Text
Tesla Corporation needs to raise funds to finance a plantexpansion, and it has decided to issue 20-year zero coupon bonds toraise the money. The required return on the bonds will be 8percent. Assume a par value of $1,000 and semiannualcompounding.a.What will these bonds sell for at issuance? (Do notround intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Issue price$ b.Using the IRS amortization rule, what interest deduction can thecompany take on these bonds in the first year? In the last year?(Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)Interest deduction First year$ Last year$ c.Using the straight-line method, what interest deduction can thecompany take on these bonds in the first year? In the last year?.(Do not round intermediate calculations and round youranswers to 2 decimal places, e.g., 32.16.)Interest deduction First year$ Last year$ d.Based on your answers in (b) and (c), which interest deductionmethod would the company prefer?IRS amortization ruleStraight-line method