A company has outstanding long-term bonds with a face value of$1,000, a 10% coupon rate, 25 years remaining until maturity, anda current market value of $1,214.82. If it pays interest semiannually,then what is the nominal annual pre-tax required rate of return ondebt? (8%) If the company’s tax rate is 40%, what is the after-taxcost of debt? (4.8%)
A company has outstanding long-term bonds with a face value of$1,000, a 10% coupon rate, 25 years remaining until maturity, anda current market value of $1,214.82. If it pays interest semiannually,then what is the nominal annual pre-tax required rate of return ondebt? (8%) If the company’s tax rate is 40%, what is the after-taxcost of debt? (4.8%)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 14P
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A company has outstanding long-term bonds with a face value of
$1,000, a 10% coupon rate, 25 years remaining until maturity, and
a current market value of $1,214.82. If it pays interest semiannually,
then what is the nominal annual pre-tax required
debt? (8%) If the company’s tax rate is 40%, what is the after-tax
cost of debt? (4.8%)
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