Compute for the approximate after tax-cost of debt.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Part 1:

The company has a P1,000 par value bond outstanding with 25 years to maturity. The bond carries an annual interest payment of P88 and is currently selling for P925. The company is in a 30% tax bracket. Compute for the approximate after tax-cost of debt. (Round off to two decimal places between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%) 

subpart : 

the company's common stock has a beta, β, of 1.2. The risk-free rate is 6%, and the market return is 11%. With the following given, the corporation estimates the cost of common stock equity, rs, to be? (Round off to two decimal places between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%)

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education