ABC Company has a BB credit rating. Companies with similar credit ratings are currently paying a premium of 150 basis points (2.84%) above the yield on U.S. Treasury bonds of 2.25% p.a. on similar term bonds. The company faces a marginal tax rate of 31 percent. What would be the after-tax cost of debt used in calculating the company's weighted average cost of capital? Present your answer in percentage terms, rounded to two decimal places (e.g., 4.56%). Round your answer to 2 decimal places. Please show all work and how to set up in excel with formulas.

Q: Starset, Incorporated, has a target debt-equity ratio of 0.76. Its WACC is 10.5 percent, and the tax…

A: Pretax cost of debt can be calculated through the WACC equation and debt-equity ratio. Here…

Q: Sixx AM Manufacturing has a target debt—equity ratio of 1.6. Its cost of equity is 0.11, and its…

A: Weight of debt = (D/E)(1+D/E) Where, D/E is debt to equity ratio Weight of debt = 1.61+1.6 =…

Q: Antwerp Co. has a debt-to-equity ratio of 1.4, a corporate tax rate of 30%, pays 4% interest on its…

A: Data given: Debt-to-equity ratio = 1.4  i.e., D/E= 1.4 Working Note #1 D/E= 1.4 1+D/E = 1+1.4…

Q: Williamson, Inc., has a debt-equity ratio of 2.45. The company's weighted average cost of capital is…

A: Here,Debt Equity ratio is 2.45Cost of Debt is 6%Tax Rate is 25%WACC is 10%

Q: Fama's Llamas has a WACC of 10.5 percent. The company's cost of equity is 12 percent, and its pretax…

A: A financial and liquidity measure called the debt-to-equity ratio shows how much debt and equity a…

Q: Caddie Manufacturing has a target debt-equity ratio of .75. Its cost of equity is percent, and its…

A: The cost of capital is the rate of return that a company gives on all its capital whether it is…

Q: mat weights should it use for its WACC calculation? Assets $1,030 Debt Equity Liabilities & Equity $…

A: Answer :Market value of debt = 500 Market value of equity = 530*1.4= 742 Weight of debt = 500 / (500…

Q: Company A has a ROA of 8% and a ROE of 12 % . Company B has a ROA of 7% and an ROE of 15%. What does…

A: We will find the ratio of equity/total assets, which measures the percentage equity allocation of…

Q: Laurel, Inc., has debt outstanding with a coupon rate of 5.8% and a yield to maturity of 7.1%. Its…

A: The objective of the question is to calculate the effective after-tax cost of debt for Laurel, Inc.…

Q: Fama's Llamas has a WACC of 9.4 percent. The company's cost of equity is 13 percent, and its pretax…

A: WACC is also known as weighted average cost of capital. It includes the cost of debt & cost of…

Q: Fama's Llamas has a WACC of 8.95 percent. The company's cost of equity is 10.4 percent, and its…

A: WACC is the weighted average cost of capital which is total weighted cost of individual source of…

Q: Maroon Industries has a debt-equity ratio of 1.6. Its WACC is 10 percent, and its cost of debt is 7…

A: To solve this, we can use the Weighted Average Cost of Capital (WACC) formula, which, in the absence…

Q: The Beta Corporation has an optimal debt ratio of 40 percent. Its cost of equity capital is 11…

A: Weighted average cost of capital (WACC) is a financial metric used to measure the average cost of…

Q: Palo Verde, Inc., has found that its cost of equity is 17 percent, and its (before-tax) cost of debt…

A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…

Q: ABC Inc. borrows money at 8%, sells bonds at 6%, and the purchasers of common stock require 11% rate…

A: WACC stands for weighted average cost of capital for a corporation. Based on the company's current…

Q: Butler, Inc., has a target debt-equity ratio of 1.70. Its WACC is 8.8 percent, and the tax rate is…

A: WACC reflects the average rate of return required by both equity and debt investors to finance the…

Q: One third of company X's asset purchases were financed by taking out a loan from the bank. The…

A: Leverage ratio= Total assets ÷shareholders equity

Q: o Coal Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs)…

A: Weighted average cost of capital of the company is the weighted cost of debt and weighted cost of…

Q: Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 8…

A: Here, Particulars Values Par Value  $1,000.00 Coupon rate 8.00% Time period 8 years…

Q: Relever Inc. has a debt-to-equity (D/E) ratio of 0.3 ; its target D//E is 1.5 . Relever currently…

A: A levered company is a company which has both debt and equity in its capital structure. It involves…

Q: Fusion Packaging is financed with 55% equity and 45% debt.  The required rate of return on its debt…

A: Weight of equity (We) = 55% Weight of debt (Wd) = 45% Cost of debt (Rd) = 4.4% Cost of equity (Re) =…

Q: Sunshine Inc. has a WACC of 10.9 percent. The company's cost of equity is 12 percent, and its cost…

A: Weighted Average Cost of Capital = WACC = 10.9%Cost of Equity = ce = 12%Cost of Debt = cd = 8.9%Tax…

Q: Planet Express has liabilities of $400 and assets of $1000. The average YTM on its debt is 10% and…

A: FORMULA FOR WACC: WACC=WP×KP+WD×KD×1-TAX WHERE, WD=weight of debtwp=weight of preferred sharekd=cost…

Q: ​Larry’s Levers, a large manufacturer of​ crowbars, has a book value​ debt-to-equity ratio of 0.30…

A: The objective of the question is to calculate the Weighted Average Cost of Capital (WACC) for…

Q: Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 20…

A: Particulars Values Par Value of Bond, FV  $1,000.00 Coupon rate 5% Time to maturity 20 years…

Q: ou are given the financial information for the Unic Company: Earnings Before Interest and Tax…

A: Company Equity is the difference between the assets and liabilities of the company . We also…

Q: The Two Dollar Store has a cost of equity of 11.8 percent, the YTM on the company's bonds is 6.3…

A: Debt-equity ratio = 0.53This means debt = 0.53 and equity = 1(0.53 debt for every 1 unit of…

Q: Andyco, Inc., has the following balance sheet, WACC calculation? and an equity market-to-book ratio…

A: WACC is also known as Weighted Average Cost of Capital. It includes the cost of debt, cost of Equity…

Q: Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 8…

A: Maturity = 8 yearsCurrent price = $1042Coupon rate = 8%Tax rate = 21%To find: Pre-tax cost of debt

Q: Austin's Cookies has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is…

A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…

Q: Debbie's Cookies has a return on assets of 8.1 percent and a cost of equity of 12.5 percent. What is…

A: Cost of Equity:The expected rate of return that an investor requires for holding a company's equity.…

Q: Nikul

A: Step 1: The calculation of the debt-equity ratio AB1WACC8.40%2Cost of equity11%3Pretax cost of…

Q: Consider the following information for Federated Junkyards of America. Debt: $65,000,000 book value…

A: WACC stands for Weighted Average Cost of Capital. It is a financial metric used to calculate the…

Q: Fama's Llamas has a WACC of 9.8 percent. The company's cost of equity is 13 percent, and its pretax…

A: After-tax cost of debt = Pre-tax cost × (1 - tax rate)Tax rate = 21% or 0.21After-tax cost of debt =…

Q: Laurel, Inc., has debt outstanding with a coupon rate of 5.9% and a yield to maturity of 7.1%. Its…

A: The effective after-tax cost of debt refers to the actual cost of borrowing for a company after…

Q: Paraglide Corp. has a target debt-equity ratio of .48. Its cost of equity is 16.4 percent, and its…

A: A company's average after-tax cost of capital from all sources, including bonds, common stock,…

Q: Andyco, Inc., has the following balance sheet and an equity market-to-book ratio of 1.8. Assuming…

A: The objective of the question is to calculate the weight of debt for the Weighted Average Cost of…