e-Midland, Inc. is issuing a $1,000 par value bond that pays 7.5 percent annual interest and matures in 15 years. Investors are willing to pay $949 for the bond and Temple faces a tax rate of 32 percent. What is Temple's after-tax cost of debt on the bond?

e-Midland, Inc. is issuing a $1,000 par value bond that pays 7.5 percent annual interest and matures in 15 years. Investors are willing to pay $949 for the bond and Temple faces a tax rate of 32 percent. What is Temple's after-tax cost of debt on the bond?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 87E: Cost of Debt Financing Stinson Corporations cost of debt financing is 6%. Its tax rate is 30%....

See similar textbooks

Question content area bottom

Part 1

The after-tax cost of debt is_____%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Similar questions

Company X pays interest to the amount of R1 500 a year on total liabilities of R10 000. It can also issue bonds with a YTM of 12%. What will the relevant before tax cost of debt be when calculating that WACC for the company? a. 18% b. 12% c. 15% d. 8%
3. Calculating Cost of Debt Shanken Corp. issued a 30-year, 5.9 percent semiannual bond three years ago. The bond currently sells for 106 percent of its face value. The company's tax rate is 22 percent. a. What is the pretax cost of debt? b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
Cost of Debt Financing Stinson Corporations cost of debt financing is 6%. Its tax rate is 30%. Required: Calculate the after-tax interest rate. (Vote: Round answer to one decimal place.)
On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
Pharoah Ltd. has issued bonds that never require the principal amount to be repaid to investors. Correspondingly, Pharoah must make interest payments into the infinite future. If the bondholders receive annual payments of $82 and the current price of the bonds is $820.00. What is the pre-tax cost of this debt? (Round answer to 2 decimal places, e.g. 15.25%.) Pre-tax cost of debt Type your answer here %
Calculate the cost of capital of a bond selling to yeild 13% for the purchaser of the bond. The borrowing firm faces a tax rate of 34% a. 8.58% b. 10.58% c. 34% d. 13.58%
hand written plz asap
Sunland Ltd. has issued bonds that never require the principal amount to be repaid to investors. Correspondingly, Sunland must make interest payments into the infinite future. If the bondholders receive annual payments of $94 and the current price of the bonds is $1,000.00. Your Answer Correct Answer What is the pre-tax cost of this debt? (Round answer to 2 decimal places, e.g. 15.25%.) Pre-tax cost of debt eTextbook and Media Your Answer Correct Answer do % What is the after-tax cost of this debt for Sunland if the firm is in the 40 percent marginal tax rate? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
Please answer in typing format
jiminy's cricket farm issued a 30-year, 7 percent semiannual bond 3 years ago. the bond currently sells for 93 percent of its face value. the compnay's tax rate is 22 percent. what is the pretax cost of debt? what is the aftertax cost of debt Please use Excel Formulas
Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. a) What is the pre-taxed cost of debt? Answer % b) What is the after tax cost of debt? Answer % c) Which is more relevant, the pre-tax or the after- tax cost of debt? Why? Answer In the question above, suppose the book value of the debt issues is $60 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 10 years to mature. The book value of this issue is $35 million and the bond sell for 57 percent of par. What is the company’s total book value of debt? $ Answer The total market value? $ Answer What is your best estimate of the after-tax cost of debt now? Answer %
Jiminy's Cricket Farm issued a 30-year, 7 percent semiannual bond 4 years ago. The bond currently sells for 95 percent of its face value. The company's tax rate is 25 percent. a. What is the pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the aftertax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Pretax cost of debt b. Aftertax cost of debt % % c. Which is more relevant, the pretax or the aftertax cost of debt? O Aftertax cost of debt O Pretax cost of debt