Question text Computing Issue Price for Zero-Coupon Bonds
Baiman, Inc. issues $1,000,000 of zero-coupon bonds that mature in 10 years. Compute the bond issue price assuming that the bonds' market rate is:

a. 10% per year compounded semiannually.
Round your answers to the nearest dollar.
Present value of principal repayment
Answer

b. 12% per year compounded semiannually.
Round your answers to the nearest dollar.
Present value of principal repayment
Answer

c. If prior to the debt issue at 12%, the firm had total assets of $3.5 million and total equity of $1 million, what would be the effect of the new borrowing on the financial leverage of the firm?
(Round your answers to two decimal places.)
Financial leverage prior to borrowing
Answer

Financial leverage subsequent to borrowing

Increase (Decrease) in financial leverage

Financial leverage prior to borrowing

Financial leverage subsequent to borrowing

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