2. Notable Nothings plans to issue new bonds with the same yield as its existing bonds.The existing bonds have a coupon rate of interest equal to 5.6% (semiannual interestpayments), 12 years remaining until maturity, and a $1,000 maturity value; they arecurrently selling for $918 each.a. If Notable issues new bonds today, what will be its before-tax cost of debt?b. What will be its before-tax cost of debt if the price of its existing bonds is $730when Notable issues the new bonds?

For the purpose of calculating the cost of debt before taxes, it is necessary to ascertain the yield…

Answered: 2. Notable Nothings plans to issue new…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter22: Corporations: Bonds

Section: Chapter Questions

Problem 1CE

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Notable nothings plans to issue new bonds with the same yield as its existing bonds. the existing bonds have a coupon rate of interest equal to 5.6 percent (semiannual interest payments), 12 years remaining until maturity, and a $1,000 maturity value; they are currently selling for $918 each. (a) if notable issues new bonds today, what will its before-tax cost of debt be? (b) what will be its before-tax cost of debt if the price of its existing bonds is $730 when notable issues the new bonds
Kindly answer using the formula: Monster Limos plans to issue new bonds that have the same yield as its existing bonds, which have a coupon rate of interest equal to 4 percent (paid semiannually), eight years remaining until maturity, and a $1,000 maturity value. The existing bonds are currently selling for $886 each. What should be the coupon rate for the new bonds? If the firm’s marginal tax rate is 40 percent, what will be the after-tax cost of debt associated with the new debt (bonds)?
(b) The total principal value of Clatterbridge Ltd bonds is $165 million, and the bonds have an annual coupon rate of 6 percent. The total cost of refunding would be 8 percent of the principal amount raised. The appropriate tax rate for the company is 30 percent. Assume the bonds were issued at par value and that coupons are paid annually. Required: How low does the market interest rate need to drop to justify refunding with a new bond issue?
I would like to understand how to solve this in Excel. Hardware Inc. bonds are selling in the market for $960.45. These bonds carry a 9 percent coupon paid semiannually, and have 15 years remaining to maturity. What is the capital gain yield assuming that the interest rates will remain constant over the year?
Inventive Response has bonds outstanding that mature in 8.5 years, have a 4 percent coupon, and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,180.30. What is the company’s after-tax cost of debt if its tax rate is 21 percent? 1.35 percent 1.70 percent 2.15 percent 2.65 percent 3.40 percent
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Kindly assist on those questions. Bayside Corporation has $1000 par value non-callable bonds with 9 years left to maturity. These bonds have a stated fixed annual coupon rate of 6.5% ( with semi annual interest payments) a) what are these bonds worth today if the required market rate of return is 9% b) what are these bonds worth today if the required market rate of return is 7.5%
You are analyzing the cost of debt for a firm. You know that the firm’s 14-year maturity, 6.60 percent coupon bonds are selling at a price of $825.00. The bonds pay interest semiannually. If these bonds are the only debt outstanding, answer the following questions: What is the current YTM of the bonds?
If a 5 year annual bond with a 6% coupon rate, currently priced at $988 and par value is $1000, what is the cost of debt before tax? For the question above, if the tax rate is 30%, how much is the after tax cost of debt?
Chamberlain Co. wants to issue new 14-year bonds for some much-needed expansion projects. The company currently has 8.6 percent coupon bonds on the market that sell for $1,032.95, make semiannual payments, and mature in 14 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000
The H-mart’s currently outstanding 6 percent annual coupon bonds have maturity of 20 years with par value of $1,000. Current price of bond is $850. H-mart believes it could issue new bonds that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is H-mart’s after tax cost of debt?
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