Highroller investment co wishes to borrow 500 million at 2, Financial Management

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Highroller investment co wishes to borrow 500 million at 2

Highroller Investment Co. wishes to borrow $500 million at 2% yearly interest. Interest payments are made annually. The principal will be repaid at the end of 10 years. Investors demand an annual return of 13% on this debt. Highrollerís tax rate is 45%.

a. Calculate the face value needed to induce investors to lend $500 million.

b. Calculate the value of ITS received by Highroller.

c. Suppose instead that the debt has a face value of $500 million and a yearly coupon rate of 13%. Principal will be repaid at the end of 10 years. Calculate the value of ITS received by Highroller in this case.

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Financial Management: Highroller investment co wishes to borrow 500 million at 2

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Financial Management: Highroller investment co wishes to borrow 500 million at 2

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