a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds have a current market value of $1,123 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 7.3 percent per year, forever. The price of the firm's common stock is now $27.87. c. A preferred stock that sells for $132, pays a dividend of 8.7 percent, and has a $100 par value. d. A bond selling to yield 11.3 percent where the firm's tax rate is 34 percent. Question content area bottom Part 1 a. The after-tax cost of debt is_____%
a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds have a current market value of $1,123 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.79 dividend last year. The firm's dividends are expected to continue to grow at 7.3 percent per year, forever. The price of the firm's common stock is now $27.87. c. A preferred stock that sells for $132, pays a dividend of 8.7 percent, and has a $100 par value. d. A bond selling to yield 11.3 percent where the firm's tax rate is 34 percent. Question content area bottom Part 1 a. The after-tax cost of debt is_____%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
a. A bond that has a
$1,000
par value (face value) and a contract or coupon interest rate of
10.2
percent. Interest payments are
$51.00
and are paid semiannually. The bonds have a current market value of
$1,123
and will mature in
10
years. The firm's marginal tax rate is
34
percet.b. A new common stock issue that paid a
$1.79
dividend last year. The firm's dividends are expected to continue to grow at
7.3
percent per year, forever. The price of the firm's common stock is now
$27.87.
c. A preferred stock that sells for
$132,
pays a dividend of
8.7
percent, and has a $100 par value. d. A bond selling to yield
11.3
percent where the firm's tax rate is
34
percent.Question content area bottom
Part 1
a. The after-tax cost of debt is_____%
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