Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 14 percent and will be sold at a market price of $1050. Flotation costs will amount to 6 percent of market value. The bonds will mature in 15 years and interest payments will be made semi-annually. The company's marginal tax rate is 21%. What is the firm's after-tax cost of debt financing? 9.38% 11.06% 11.23% O 14.00% 14.21%

Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 14 percent and will be sold at a market price of $1050. Flotation costs will amount to 6 percent of market value. The bonds will mature in 15 years and interest payments will be made semi-annually. The company's marginal tax rate is 21%. What is the firm's after-tax cost of debt financing? 9.38% 11.06% 11.23% O 14.00% 14.21%

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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Similar questions

Avicorp has a $12.3 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 96% of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.
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?
Jimstan & Jimstan Corp. can sell a new 10-year bond with an annual coupon of 5% and a face value of $1,000 for $1,070. The company will incur flotation costs of $40 per bond and has a tax rate of 25%. What is the company's after-tax cost of debt? (use linear allocation method.)
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.
Please answer ASAP
Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years. These bonds pay interest semiannually, and are currently selling for $1080 per $1000 face value. If Dixon issues new debt, it plans to sell bonds with a maturity of 12 years. Estimate Dixon's marginal post-tax cost of debt. Dixon faces a marginal tax rate of 30%. 3.06% 4.15% 4.35% 3.57% 2.90%
(Cost of debt) Sincere Stationery Corporation needs to raise $459,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 11.2 percent with interest paid semiannually and a 15-year maturity. Investors require a rate of return of 8.6 percent. a. Compute the market value of the bonds. b. How many bonds will the firm have to issue to receive the needed funds? c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent? a. The market value of the bonds is $ (Round to the nearest cent.)
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 13.00 percent semiannual coupon bonds are selling at a price of $1,207. These bonds are the only debt outstanding for the firm. What is the current YTM of the bonds? (to 2 decimal places) What is the after-tax cost of debt for this firm if it has a marginal tax rate of 34 percent? What is the current YTM of the bonds and after-tax cost of debt for this firm if the bonds are selling at par? (round final answer to 2 decimal places) YTM __% After-tax cost of debt ___%

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