he Finance Manager is exploring options to further reduce the company’s weighted average cost of capital. He has suggested to the company’s CEO, that increasing the company’s debt and decreasing...

he Finance Manager is exploring options to further reduce the company’s weighted average cost of

capital. He has suggested to the company’s CEO, that increasing the company’s debt and decreasing

equity may be the best option, as the cost of equity is higher than the cost of debt.

As such, the company is considering issuing a $100,000 20-year bond, with an annual coupon rate of

6%, and quarterly interest payments.

Required: If the company anticipates that the bond will close at a yield to maturity of 8%, given the

company’s credit ratings and current market conditions, how much would an investor be willing to pay

for $1,000 face value of this bond at issue?