Problem:
Gillian Stationery Corporation needs to raise $600000 to improve its manufacturing plant. It has decided to issue a $1000 par value bond with an annual coupon rate of 8.0 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 10.0 percent.
Task:
Question 1: Compute the market value of the bonds.
Question 2: How many bonds will the firm have to issue to receive the needed funds?
Question 3: What is the firms' after-tax cost of debt if the firm's tax rate is 34 percent?
Please provide all workings out and also provide step by step solution of each question.