AAPL Inc. is a publicly traded company that has $120 million in bank loan on its books, with a stated interest rate of 4% and $150 million in publicly traded bonds, with a coupon rate of 3.7%. The company currently has a bond rating of BBB, with a default spread of 1.7%. If the current T.Bill rate is 1%, the ten-year T.Bond rate is 3.5% and the marginal tax rate is 35%, what is the pre-tax cost of debt? Select one: а. 2.50% b. 4% с. 3.70% d. 3.50% е. 5.20%

AAPL Inc. is a publicly traded company that has $120 million in bank loan on its books, with a stated interest rate of 4% and $150 million in publicly traded bonds, with a coupon rate of 3.7%. The company currently has a bond rating of BBB, with a default spread of 1.7%. If the current T.Bill rate is 1%, the ten-year T.Bond rate is 3.5% and the marginal tax rate is 35%, what is the pre-tax cost of debt? Select one: а. 2.50% b. 4% с. 3.70% d. 3.50% е. 5.20%

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

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Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $1,905 and matures in 15 years. The par value is $2,000 and the company's tax rate is 21 percent. What is the company's aftertax cost of debt? Multiple Choice 3.89% 3.51% 5.54% 3.27% 4.46%
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below. Coupon Rate Maturity Face Value $ 8.90% Bond 1 2 3 6.80 8.60 9.20 Aftertax cost of debt Price Quote 106.8 93.4 105.8 96.5 % 4 years 6 years 14.5 years 25 years If the corporate tax rate is 25 percent, what is the aftertax cost of the company's debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 28,000,000 31,000,000 36,000,000 55,000,000
Charter Corp. has issued 1,554 debentures with a total principal value of $1,554,000. The bonds have a coupon interest rate of 9%. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter is in a 39% corporate tax bracket, what is the company's net after-tax interest cost associated with this bond issue?
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. Bond 1 2 3 4 Coupon Rate Price Quote 5.1% 6.7 Cost of debt 6.6 5.9 104.86 113.62 112.17 101.41 Maturity 5 years 8 years 15.5 years 25 years % Face Value $ If the corporate tax rate is 24 percent, what is the aftertax cost of the company's debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 59,000,000 54,000,000 74,000,000 81,000,000
Galvatron Metals has a bond outstanding with a coupon rate of 5.9 percent and semiannual payments. The bond currently sells for $945 and matures in 21 years. The par value is $1,000 and the company's tax rate is 24 percent. What is the company's aftertax cost of debt? Multiple Choice 4.48% 3.19% 4.85% 5.13%
Sandhill has determined that it could issue $1050 face value bonds with an 8 percent coupon paid semiannually and a 5-year maturity at $954.05 per bond. If Sandhill's marginal tax rate is 36 percent, its after-tax cost of debt is closest to: 6.6 percent. 6.9 percent. 6.2 percent. 6.3 percent.
To help finance a major expansion, a company sold a noncallable bond several years ago that now has 14 years to maturity. This bond has a 14.00% annual coupon, paid semiannually, sells at a price of $1,400, and has a par value of $1,000. If the firm's tax rate is 21%, what is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations. 8.94% 7.06% 3.53%
Ernie's has 3,500 bonds outstanding with a face value of $1,000 each and a coupon rate of 8.5 percent. What is the amount of the annual interest tax shield if the tax rate is 34 percent?
Lugget Corp. has one bond issue outstanding with an annual coupon of 3.8%, a face value of $ 1,000 and a price of $1,068.24, which matures in 10 years. The company's tax rate is 33 %. What is Lugget's pre-tax cost of debt?
Charter Corp. issued1,662 debentures with a $1,000 par value and 6% coupon rate. a. What dollar amount of interest per bond can an investor expect to receive each year from Charter? b. What is Charter's total interest expense per year associated with this bond issue? c. Assuming that Charter pays a 21% corporate tax, what is the company's net after-tax interest cost associated with this bond issue?
The Monroe Co. is going to issue a twenty-year 8% (annual) coupon bond making semi-annual coupon payments. The bond will be priced at $907.99 per If the firm’s tax rate is 39%, what is their after-tax cost of debt as a percent to two places.
The Textile Co. has an annual bond outstanding that matures in 8 years and carries a 7 percent coupon. The bond has a market value of $1,030.44. The company has a corporate tax rate of 35 percent. What is the aftertax cost of debt? 2.28 percent 4.23 percent 5.76 percent 6.50 percent

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