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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- Suppose the company Powerland borrows the new $2 million debt as perpetual bonds at a 5% cost which is equal to the risk-free rate (rf). If Corporate Income Tax rate is 23% rate and the Personal Tax for Debtholders is 5%, by how much does the interest tax shield increase the value of Powerland? a. $1,621,053 b. $100.000 C. - $100,000 d. $460,0001. ACT Inc. has a $1,000 (face value), 20 year bond issue selling for $1,229.40 that pays an annual coupon of 8.0 percent. Their marginal tax rate is 25%. a. What would be BAT's current before-tax component cost of debt? a. What would be BAT's current after-tax component cost of debt?How much debt Is outstanding if the present value of a perpetual tax shield is $350,000, the tax rate is 21% and the interest rate on the debt is 10%? O $300,000 O$1428,571 O$3.000,000 O$1.666.667
- You can invest in taxable bonds that are paying a yield of 9.4 percent or a municipal bond paying a yield of 7.65 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? a b. Rate of return The security bond one should buy is %Suppose your marginal federal income tax rate is 25 percent. 1. What is your after-tax return from holding a one-year corporate bond with a yield of 5.25 percent? (1 pt) 2. What is your after-tax return from a holding a one-year municipal bond with a yield of 4 percent? (1 pt) 3. How would you decide which bond to hold? (Assume that Both bonds carry the same risk.) (1 pt)Suppose you invest in a municipal bond that pays a yield of 9%. If your marginal tax is 29%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places)
- Suppose you invest in a municipal bond that pays a yield of 149%. If your marginal tax is 15%, what is the equivalent yield on the taxable bond? (write your answer in percentage and round it to 2 decimal places) A Moving to another question will save this response. «» DELLIf 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....
- For the case in Example 11. 7, suppose that Capstone decided to finance the remaining $22 million by securing a term loan and issuing 20-year $1,000 par bonds under the following conditions: Interest Source Amount Fraction Rate Term loan $6.6 million 0.30 12.16% per year Bonds $15.4 million 0.70 10.74% per yearCapstone's marginal tax rate is 40%, which is expected to remain constant in the future. Determine the after-tax cost of debt.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?A firm is proceeding with a bond issue to raise (borrow) $100 million. The interest rate is the cost of debt of 8%, and interest will be paid annually for the nine (9) year term of the debt. If the company's tax rate is 30%, what is the present value of the total interest tax shields of this nine-year debt? A. $30.0 million B. $15.0 million C. $20.5 million D. $8.0 million