Problem:
Thomson Engineering is issuing new 30-year bonds that have warrants attached. If not for the attached warrants, the bonds would carry an 11% annual interest rate. However, with the warrants attached the bonds will pay an 8% annual coupon. There are 30 warrants attached to each bond, which have a par value of $1,000.
Required:
Question: What is the value of the straight-debt portion of the bonds?
Note: Show supporting computations in good form.