Flotation costs and the cost of debt in March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 3.75% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $1,005.29 per bond and the flotation cost was $17.51 per bond. Pepsi's corporate tax rate is 21%. a. Ignoring flotation costs, what is Pepsi's before-tax and after-tax costs of debt? b. Considering flotation costs, what is Pepsi's before-tax and after-tax costs of debt?
Flotation costs and the cost of debt in March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 3.75% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $1,005.29 per bond and the flotation cost was $17.51 per bond. Pepsi's corporate tax rate is 21%. a. Ignoring flotation costs, what is Pepsi's before-tax and after-tax costs of debt? b. Considering flotation costs, what is Pepsi's before-tax and after-tax costs of debt?
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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Flotation costs and the cost of debt in March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 3.75% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $1,005.29 per bond and the flotation cost was $17.51 per bond. Pepsi's corporate tax rate is 21%.
a. Ignoring flotation costs, what is Pepsi's before-tax and after-tax costs of debt? b. Considering flotation costs, what is Pepsi's before-tax and after-tax costs of debt?
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