Calculating Costs of Issuing Debt Roy's Bar,Inc

question 75

Multiple Choice

Calculating Costs of Issuing Debt Roy's Bar,Inc.,needs to raise $25 million to finance firm expansion.In discussions with its investment bank,Roy's learns that the bankers recommend a debt issue with an offer price of $1,000 per bond and they will charge an underwriter's spread of 6 percent of the gross price.How many bonds will Roy's need to sell in order to receive the $25 million they need?

• A)23,500
• B)25,000
• C)26,500
• D)26,596

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Definitions:

Internal Locus

The psychological concept referring to individuals who believe they have control over the outcomes of their actions and events in their lives.

Guarantee Financial

A commitment by one party to assume responsibility for fulfilling a financial obligation or repaying a debt in the event of default by the primary debtor.

Improved Customer

A term that may not be widely recognized; if it refers to enhancing customer satisfaction or experience, then it's about strategies to better meet customer needs and improve their overall experience.

Increase Sales

A business objective aimed at enhancing the volume or value of products sold within a specific period.