Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 4.75% coupon bonds that pay semi-annual interest. A the time the bonds were issued, the market paid $992.76 per bond and the flotation cost was $18.14 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? ... a. Ignoring flotation cost, Pepsi's before-tax cost of debt is 4.80 %. (Round to two decimal places.) Ignoring flotation cost, Pepsi's after-tax cost of debt is 3.79 %. (Round to two decimal places.) b. Considering flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.)
Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 4.75% coupon bonds that pay semi-annual interest. A the time the bonds were issued, the market paid $992.76 per bond and the flotation cost was $18.14 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? ... a. Ignoring flotation cost, Pepsi's before-tax cost of debt is 4.80 %. (Round to two decimal places.) Ignoring flotation cost, Pepsi's after-tax cost of debt is 3.79 %. (Round to two decimal places.) b. Considering flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.)
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
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Transcribed Image Text:Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 30-year 4.75% coupon bonds that pay semi-annual interest. At
the time the bonds were issued, the market paid $992.76 per bond and the flotation cost was $18.14 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?
a. Ignoring flotation cost, Pepsi's before-tax cost of debt is 4.80 %. (Round to two decimal places.)
Ignoring flotation cost, Pepsi's after-tax cost of debt is 3.79 %. (Round to two decimal places.)
b. Considering flotation cost, Pepsi's before-tax cost of debt is
%. (Round to two decimal places.)
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