GM needs $95 million to support operations. To raise the needed funds, the firm issued bonds at $1,000 each bond. The flotation cost is 5%. Calculate the number of outstanding bonds to be issued. Debt financing is the process of raising debt capital by issuing shares to investors due to short-term need or long-term goal or for the future growth of the firm.

Question

Grand Energy Corporation (GE) plans to issue bonds to raise $299 million. Ge's Investment banker will charge 8 percent of the total amount issued to help raise the funds. The market value of each bond at issue time will be $1,000. How many bonds must GE sell to net $299 million after flotation costs? Assume that fractions of bonds cannot be issued. Round yout answer to the nearest whole number, bonds Show how much of the total amount issued will consist of flotation costs and how much GE will receive after flotation costs are paid. Enter your answers in dollars. For example, on answer of $2 million should be entered as 2,000,000, not 2. Round your answers to the nearest dollar Floation costs $ Net proceeds:

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Chapter 3, Problem 13PROB

Summary Introduction

GM needs $95 million to support operations. To raise the needed funds, the firm issued bonds at $1,000 each bond. The flotation cost is 5%. Calculate the number of outstanding bonds to be issued.

Debt financing is the process of raising debt capital by issuing shares to investors due to short-term need or long-term goal or for the future growth of the firm.

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