MGFB10H3 Final: MGTB09H3_assignment2
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SUM Company's balance sheet as of today is as follows:
Long-term debt (bonds, at par) | $10,000,000 |
Preferred stock | 2,000,000 |
Common stock ($10 par) | 10,000,000 |
Retained earnings | 4,000,000 |
Total debt and equity | $26,000,000 |
The bonds have an 9.3% coupon rate, payable semiannually, and a par value of $1,000. They mature exactly 10 years from today. The yield to maturity is 12%, so the bonds now sell below par. What is the current market value of the company's debt?
Select the correct answer and explain answer:
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