Question

Grand Energy Corporation (GE) plans to issue bonds to raise $190 million. GE's investment banker will charge 5 percent of the total amount issued to help raise the funds. The market value of each bond at issue time will be $1,000. How many bonds must GE sell to net $190 million after flotation costs? Assume that fractions of bonds cannot be issued. Round your answer to the nearest whole number.

Answer 1

The number of bonds that GE must sell to net $190 million after flotation costs is 200,000 bonds.

Number of bonds

First step is to calculate the amount issue

Net proceeds = Amount of issue x (1 - Flotation costs)

$190,000,000 = Amount of issue x (1 - 0.05)

Amount of issue = $190,000,000/0.95

Amount of issue= $200,000,000

Second step is to calculate number of bonds

Number of bonds = $200,000,000/$1,000

Number of bonds= 200,000 bonds

Inconclusion the number of bonds that GE must sell to net $190 million after flotation costs is 200,000 bonds.

Learn more about bonds here:brainly.com/question/25596583