Granny's Home Remedy has a $27 million bond issue outstanding with a coupon rate of 8.75 percent and a current yield of 8.13 percent. What is the present value of the tax shield if the tax rate is 35 percent? a. $768,285 b. $826,875 c. $839,002 d. $8,160,000 e. $9,450,000
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- If a 5 yr. AA- General Dynamics note is yielding a 35% tax bracket investor 7.56125% while a comparable maturity note from Philadelphia, Pennsylvania is yielding 4.8735%. If the inflation rate is 2.2765%, which bond would the investor prefer and why? If the marginal tax rate for the investor increases to 38.95%, which bond would the investor prefer? What is the critical tax rate?Asap plzzzzzz....You can invest in taxable bonds that are paying a yield of 9.7 percent or a municipal bond paying a yield of 7.95 percent. Assume your marginal tax rate is 21 percent. a. Calculate the after-tax rate of return on the taxable bond? (Round your answer to 2 decimal places. (e.g., 32.16))b. Which security bond should you buy?
- Jiminy's Cricket Farm issued six years ago a 30-year $1000 face value bond with an 8 percent annual coupon rate that has semiannual payments. The bond currently sells for $1,140. What is the after-tax cost of debt if the company's tax rate is 35 percent? O 4.425% 4.145% 4.955% 5.065%5) A 10-year municipal bond yields 4.8%. Your marginal tax rate (including state and federal taxes) is 27%. What interest rate on a 10-year corporate bond of equal risk would provide you with the same after-tax return? a. 3.50% b. 6.25% c. 6.58% d. 6.90%Suppose that LilyMac Photography expects EBIT to be approximately $46,000 per year for the foreseeable future, and that it has 500 10-year, 5 percent annual coupon bonds outstanding. (Use Table 11.1.)What would the appropriate tax rate be for use in the calculation of the debt component of LilyMac’s WACC?
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