DuPont reports in a recent balance sheet $598 million of 5.25 percent notes payable due in 2016.The company’s income tax rate is approximately 19 percent.a. Compute the company’s after-tax cost of borrowing on this bond issue stated as a total dollaramount.b. Compute the company’s after-tax cost of borrowing on this bond issue stated as a percentageof the amount borrowed.c. Describe briefly the advantage of raising funds by issuing bonds as opposed to stocks.
DuPont reports in a recent balance sheet $598 million of 5.25 percent notes payable due in 2016.The company’s income tax rate is approximately 19 percent.a. Compute the company’s after-tax cost of borrowing on this bond issue stated as a total dollaramount.b. Compute the company’s after-tax cost of borrowing on this bond issue stated as a percentageof the amount borrowed.c. Describe briefly the advantage of raising funds by issuing bonds as opposed to stocks.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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DuPont reports in a recent
The company’s income tax rate is approximately 19 percent.
a. Compute the company’s after-tax cost of borrowing on this bond issue stated as a total dollar
amount.
b. Compute the company’s after-tax cost of borrowing on this bond issue stated as a percentage
of the amount borrowed.
c. Describe briefly the advantage of raising funds by issuing bonds as opposed to stocks.
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