Due to a Number of Lawsuits Related to Toxic Wastes,a

question 51

Multiple Choice

Due to a number of lawsuits related to toxic wastes,a major chemical manufacturer has recently experienced a market reevaluation.The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8 percent,with interest being paid semiannually.The required simple rate on this debt has now risen to 16 percent.What is the current value of this bond?

• A) $1,273
• B) $1,000
• C) $7,783
• D) $550
• E) $450

---

Definitions:

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Profit Margin

A financial metric that measures the percentage of revenue remaining after all expenses have been deducted from sales.

External Financing Need

The requirement for funds from sources outside the business, such as loans or equity financing, to support operations or growth.

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings distributed to its shareholders in the form of dividends.