BC Brewery Issues $30 Million in Straight Bonds at an Original

question 74

Multiple Choice

BC Brewery issues $30 million in straight bonds at an original issue discount of 2% and a coupon rate of 6%.The firm also pays underwriting fees of 2.5% on the face value of the bonds.What are the net proceeds to BC Brewery from the bond issue?

• A)$27.45 million
• B)$26.85 million
• C)$29.25 million
• D)$30 million
• E)$28.65 million

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Definitions:

Current Monetary Assets

Short-term financial assets that are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value.

Statement of Retained Earnings

A financial report detailing the changes in retained earnings over a specific period, influenced by net income and dividend payments.

Functional Currency

The primary currency used by a business or unit in its financial statements, reflecting the economic environment in which it primarily operates.

Income Tax Expense

The total amount of income tax a company is obligated to pay to governmental authorities based on its taxable income.