Filer Manufacturing has 6,304,698 shares of common stock outstanding. The current share price is $64.63, and the book value per share is $7.44. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $52,563,528, has a 0.05 coupon, matures in 10 years and sells for 83 percent of par. The second issue has a face value of $79,570,384, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par. The most recent dividend was $2.68 and the dividend growth rate is 0.04. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 0.34. What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
Filer Manufacturing has 6,304,698 shares of common stock outstanding. The current share price is $64.63, and the book value per share is $7.44. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $52,563,528, has a 0.05 coupon, matures in 10 years and sells for 83 percent of par. The second issue has a face value of $79,570,384, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par. The most recent dividend was $2.68 and the dividend growth rate is 0.04. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 0.34. What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
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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Transcribed Image Text:Filer Manufacturing has 6,304,698 shares of common stock outstanding. The current share
price is $64.63, and the book value per share is $7.44. Filer Manufacturing also has two bond
issues outstanding. The first bond issue has a face value of $52,563,528, has a 0.05 coupon,
matures in 10 years and sells for 83 percent of par. The second issue has a face value of
$79,570,384, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par.
The most recent dividend was $2.68 and the dividend growth rate is 0.04. Assume that the
overall cost of debt is the weighted average of that implied by the two outstanding debt
issues. Both bonds make semiannual payments. The tax rate is 0.34.
What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
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