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508 Brooks ◼ Financial Management: Core Concepts, 4e
© 2018 Pearson Education, Inc.
May
$315.00
$132.00
$920.00
$801.00
June
$486.00
$0
$950.00
$0
July
$370.00
$0
$600.00
$659.00
August
$289.00
$0
$540.00
$0
September
$233.00
$220.00
$360.00
$480.00
October
$247.00
$367.00
$220.00
$0
November
$276.00
$482.00
$0
$461.00
December
$185.00
$559.00
$0
$0
TOTAL
$3,339.00
$4,675.00
$4,570.00
$3,339.00
512 Brooks ◼ Financial Management: Core Concepts, 4e
Net Price is $1,195.12 × (1 – 0.03) = $1,159.27
Yield is:
Yield is:
Mode: P/Y = 2, C/Y = 2
Input 40 –770.72 25 1000
Keys N I/Y PV PMT FV
CPT 12.2165
Answer:
Chapter 15 ◼ Raising Capital 513
© 2018 Pearson Education, Inc.
For Lunar Vacations the market price is:
Mode: P/Y = 2, C/Y = 2
Input 100 10.0 50 1000
Keys N I/Y PV PMT FV
CPT $1,000.00
Net Price is $1,000.00 × (1 – 0.03) = $970.00
Yield is:
Mode: P/Y = 2, C/Y = 2
Input 100 –970.00 50 1000
Keys N I/Y PV PMT FV
CPT 10.3114
10. Selling bonds. Lunar Vacations needs to raise $6,000,000 for its new project (a golf course
on the moon). Astro Investment Bank will sell the bond for a commission of 2.5%. The
market is currently yielding 7.5% on twenty-year semiannual bonds. If Lunar wants to issue a
6% semiannual coupon bond, how many bonds will it need to sell to raise the $6,000,000?
ANSWER
First find the price of each bond in the market and then discount the bond by the commission.
Take the net price to Lunar Vacations and divide this into the $6,000,000 for the number of
bonds needed.
Chapter 15 ◼ Raising Capital 515
© 2018 Pearson Education, Inc.
Input 40 –1,069.67 42.5 1000
Keys N I/Y PV PMT FV
CPT 7.8061
For Louis Sluggers the market price is:
Mode: P/Y = 2, C/Y = 2
Input 20 7.5 45 1000
Keys N I/Y PV PMT FV
CPT $1,104.22
Net Price is $1,104.22 × (1 – 0.02) = $1,082.14
Yield is:
Mode: P/Y = 2, C/Y = 2
Input 20 –1,082.14 45 1000
Keys N I/Y PV PMT FV
CPT 7.8018
For Spalding the market price is:
Mode: P/Y = 2, C/Y = 2
Input 40 8.0 35 1000
Keys N I/Y PV PMT FV
CPT $901.04
Net Price is $901.04 × (1 – 0.04) = $864.99
Yield is:
Mode: P/Y = 2, C/Y = 2
Input 40 –864.99 35 1000
Keys N I/Y PV PMT FV
CPT 8.4056
For Champions the market price is:
Mode: P/Y = 2, C/Y = 2
Input 60 8.5 32.5 1000
Keys N I/Y PV PMT FV
516 Brooks ◼ Financial Management: Core Concepts, 4e
© 2018 Pearson Education, Inc.
CPT $784.07
Net Price is $784.07 × (1 – 0.03) = $760.55
Yield is:
Mode: P/Y = 2, C/Y = 2
Input 60 –760.55 32.5 1000
Keys N I/Y PV PMT FV
CPT 8.7739
12. Selling bonds. Rawlings needs to raise $40,000,000 for its new manufacturing plant in
Jamaica. Berkman Investment Bank will sell the bond for a commission of 2.5%. The market
is currently yielding 7.5% on twenty-year zero-coupon bonds. If Rawlings wants to issue a
zero-coupon bond, how many bonds will it need to sell to raise the $40,000,000?
ANSWER
