Calculating Costs of Issuing Debt R&D,Inc

question 31

Multiple Choice

Calculating Costs of Issuing Debt R&D,Inc.,needs to raise $200 million to finance firm expansion.In discussions with its investment bank,R&D'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 3 percent of the gross price.How many bonds will R&D need to sell in order to receive the $200 million they need?

• A)194,000
• B)200,000
• C)206,000
• D)206,186

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