Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $951 and matures in 23 years. The par value is $1,000 and the company's tax rate is 25 percent. What is the company's aftertax cost of debt? Multiple Choice 5.20% 5.50% 4.80% 3.23% 3.46%

Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $951 and matures in 23 years. The par value is $1,000 and the company's tax rate is 25 percent. What is the company's aftertax cost of debt? Multiple Choice 5.20% 5.50% 4.80% 3.23% 3.46%

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

See similar textbooks

Similar questions

Cost of debt using both methods (YTM and the approximation formula) Currently, Warren Industries can sell 10-year, $1,000-par-value bonds paying annual interest at a 8% coupon rate. Because current market rates for similar bonds are just under 8%, Warren can sell its bonds for $990 each; Warren will incur flotation costs of $30 per bond. The firm is in the 27% tax bracket. a. Find the net proceeds from the sale of the bond, No- b. Calculate the bond's yield to maturity (YTM) to estimate the before-tax and after-tax costs of debt. c. Use the approximation formula to estimate the before-tax and after-tax costs of debt. a. The net proceeds from the sale of the bond, No, is $. (Round to the nearest dollar.) (...)
1.A bond has a $15million face value and a coupon rate of 9 percent. It has floatation costs of 5 percent of the face value. The bond matures in 10 years. The firm’s average tax rate is 30 percent and its marginal tax rate is 21 percent. Compute the after-tax cost of debt. 2. Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 15 years. Investors are willing to pay $850 for the bond. Floatation costs will be 3 percent of market value. The company is in a 21 percent tax bracket. What will be the firm’s after-tax cost of debt on the bond? 3. Sincere Stationary Corporation needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 12 percent annual coupon rate and a 10 year maturity. If floatation costs are 10.5 percent of the market price, how many bonds will the firm have to issue to receive the needed funds? Give an example of why a company like Sincere Stationary…
Current Attempt in Progress You know that the after-tax cost of debt capital for Wildhorse Company is 18.9 percent. If the firm has only one issue of five-year bonds outstanding. Assume the bonds make semiannual coupon payments and the marginal tax rate is 30 percent. Assume the par value of the bonds is $1,000. Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) Problem 13.15 a1-a2 (Excel Video)(a1) Calculate the pre-tax cost of debt capital. Pre-tax cost of debt capital %
Question You want to buy Wolfuman Inc.'s semi-annual bonds that pay a 4.9% coupon rate. They have 6 years to maturity and a discount rate of 10.2%. How much would you need to pay per bond? $799 $833 $733 $766 Question Mandol Lin Inc. has outstanding bonds worth $812, and making semi-annual payments of $25 with five years to maturity. What is the coupon rate? 6.4% 5.0% 2% 2.5%
Current Attempt in Progress You know that the after-tax cost of debt capital for Oriole Company is 15.4 percent. If the firm has only one issue of five-year bonds outstanding. Assume the bonds make semiannual coupon payments and the marginal tax rate is 30 percent. Assume the par value of the bonds is $1,000. Excel Template (Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you've been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) Problem 13.15 a1-a2 (Excel Video)(a1) Calculate the pre-tax cost of debt capital. Pre-tax cost of debt capital
Company XYZ has issued 65,000 zero-coupon bonds with a face value of $1,000. Those bonds will mature in 6 years and the current market price is $622.14 per bond. Investors use semi-annual compounding for bonds. Marginal corporate income tax rate is 21%, find the annual after-tax effective cost of debt.
Bond Yield and After-Tax Cost of Debt A company's 6% coupon rate, semiannual payment, $1,000 par value bond that matures in 25 years sells at a price of $587.6. The company's federal-plus-state tax rate is 40%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to two decimal places.
The outstanding debt of Berstin Corp. has ten years to maturity, a current yield of 6%, and a price of $80. What is the pretax cost of debt if the tax rate is 30%. Note: The current yield of a bond is its annual coupon divided by its price. A. 4.65% B. 6% OC. 6.2% OD. 7.75%
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below. Coupon Rate Maturity Face Value $ 8.90% Bond 1 2 3 6.80 8.60 9.20 Aftertax cost of debt Price Quote 106.8 93.4 105.8 96.5 % 4 years 6 years 14.5 years 25 years If the corporate tax rate is 25 percent, what is the aftertax cost of the company's debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. 28,000,000 31,000,000 36,000,000 55,000,000
Dengar
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. Bond 1 2 3 4 Coupon Rate Price Quote 5.1% 6.7 Cost of debt 6.6 5.9 104.86 113.62 112.17 101.41 Maturity 5 years 8 years 15.5 years 25 years % Face Value $ If the corporate tax rate is 24 percent, what is the aftertax cost of the company's debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 59,000,000 54,000,000 74,000,000 81,000,000
Mojo Mining has a bond outstanding that sells for $2,174 and matures in 18 years. The bond pays semiannual coupons and has a coupon rate of 7.14 percent. The par value is $2,000. If the company's tax rate is 21 percent, what is the aftertax cost of debt? Multiple Choice O O 6.07% 4.75% 534% 65th

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS