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Homework answers / question archive / The Pathway Company needs to raise $100 million to modernize its current facility and management has decided to raise the funds with a bond issue

The Pathway Company needs to raise $100 million to modernize its current facility and management has decided to raise the funds with a bond issue

Finance

The Pathway Company needs to raise $100 million to modernize its current facility and management has decided to raise the funds with a bond issue. Potential investors currently require a 10.50 percent rate of return. The bond specifics are: (1) $1,000 face value, (2) 9.00 percent coupon rate, (3) Semi-annual coupons, (4) 10-year maturity, and (5) $55 per bond in flotation costs. Calculate the company's cost of capital for this bond issuance.

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