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?DBF borrows $3.29B by issuing 12-year bonds. ECB's cost of debt is 6.07%, so it will need to pay interest each year for the next 12 years, and then repay the principal $3.29B in year 12. ECB's marginal tax rate will remain 42.99% throughout this period. By how much does the interest tax shield increase the value of DBF? NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.000, etc.
- 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$1.666.667You 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)
- 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?
- 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%ACT Inc. has a $1,000 (face value), 30 year bond issue selling for $838.88 that pays an annual coupon of 10.0 percent. Their marginal tax rate is 25%. a. What would be BAT's current before-tax component cost of debt?An investor is trying to decide between a muni paying 5.75% or an equivalent taxable corporate paying 8.25%. What is the minimum marginal tax rate the investor must have to consider buying the municipal bond? A. 30.00% B. 25.00% C. 66.67% D. 20.00%