cost of borrowing alternatives

[drglas]

A company with a 34% tax rate has decided to issue $100 million of 7 year debt. It has three alternatives.

1. a U.S. public offering would require 8% coupon with interest payable semi annually and $900,000 of flotation expense.

2. a U.S. private placement would require an 8.3/8% coupon with interest semi-annually and $500,000 of flotation expense.

3. A Eurobond offering would requirean 8.1/8% coupon with interest payable annually and $1,100,000 of flotation expense.

a. Please calculate the after-tax cost of borrowing for each alternative.

b. which alternative has the lowest cost of borrowing?

 

[Denis]

A company with a 34% tax rate has decided to issue $100 million of 7 year debt. It has three alternatives.
1. a U.S. public offering would require 8% coupon with interest payable semi annually and $900,000 of flotation expense.

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Can you answer this:
the above 7 year debt is purchased by an investor who wishes to realise 9% compounded semi annually;
what is the purchase price?
In other words: at 9% compounded semi annually, what is the purchase price of a 7 year $100 million
bond with semi annual coupons of $4 million ?

 

[drglas]

Thanks fo your help I already got the answer