Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.58 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $4.0 million, and is quoted at 105 percent of face value. The second issue has a coupon rate of 6.26 percent, a par value of $2,000 per bond, matures in 25 years, has a total face value of $8.3 million, and is quoted at 93 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt?

Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of 3.58 percent, a par value of $1,000 per bond, matures in 6 years, has a total face value of $4.0 million, and is quoted at 105 percent of face value. The second issue has a coupon rate of 6.26 percent, a par value of $2,000 per bond, matures in 25 years, has a total face value of $8.3 million, and is quoted at 93 percent of face value. Both bonds pay interest semiannually. The company's tax rate is 35 percent. What is the firm's weighted average aftertax cost of debt?

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

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The bonds issued by Party Citeh bear a coupon of 8 percent, payable semiannually. The bond matures in 19 years and has a $1,000 face value. Currently, the bond sells at $981. The yield to maturity (YTM) is ________%.
Two 25-year maturity mortgage-backed bonds are issued. The first bond has a par value of $10,000 and promises to pay a 7.0 percent annual coupon, while the second is a zero coupon bond that promises to pay $10,000 (par) after 25 years, with interest accruing at 6.5 percent. At issue, bond market investors require a 8.5 percent interest rate on both bonds. Now assume that both bonds promise interest at 7.0 percent, compounded semiannually. What will be the initial price for each bond? What is the initial price of Bond 1 and Bond 2?
General Mills has a $1,000 par value, 23-year to maturity bond outstanding with an annual coupon rate of 8.11 percent per year, paid semiannually. Market interest rates on similar bonds are 8.77 percent. Calculate the bond's price today. Round the answer to two decimal places.
Footsteps Co. has a bond outstanding with a coupon rate of 6.3 percent and annual payments. The bond currently sells for $952.05, matures in 19 years, and has a par value of $1,000. What is the YTM of the bond? Multiple Cholce 6.30% 6.08% 5.63% 6.62% 6.76%
(b) Bluechip Company has TWO (2) bonds to evaluate and below are the information:- • Bond A has coupon rate of 10 percent and par value of RM1,000. The bond duration is 7 years with yield to maturity is 8 percent annually. • Bond B with coupon rate of 6 percent and yield to maturity is 10 percent. The maturity for bond is 5 years which paid semiannually. Evaluate the purchase price of both bonds and identify its relationship with the par value.
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Cardoza issues bonds with a coupon rate of 7%, face value of $210,000, and maturity in 10 years. Interest payments are made semi-annually. The market rate for this type of bond is 6%. Calculate the issue price of the bonds. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice $171,360. $210,000. $195,731. $225,622.
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 9 years. The bond certificate indicates that the stated coupon rate for this bond is 5%and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.3%, then the price of this bond will be: The price of the bond is: $ (round to two decimal places)
On January 1 of this year, Ikuta Company issued a bond with a face value of $115,000 and a coupon rate of 4 percent. The bond matures in 3 years and pays interest every December 31. When the bond was issued, the annual market rate of interest was 5 percent. Ikuta uses the effective-interest amortization method. (FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required: 1. Complete a bond amortization schedule for all three years of the bond's life. 2. What amounts will be reported on the income statement and balance sheet at the end of Year 1 and Year 2? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete a bond amortization schedule for all three years of the bond's life. Note: Round your intermediate calculations and final answers to whole dollars. Date January 01, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 Cash Interest Interest Expense Amortization Book…
botanica incorporation has bonds with 14 years to maturity, a face value of $1000, a YTM of 8.2 percent, and a current price of 1,132. The bonds make annual payments. what must be the coupon rate on these bonds
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 16-year, $1,000 par value bonds of Waco Industries pay 11 percent interest annually. The market price of the bond is $855, and the market's required yield to maturity on a comparable-risk bond is 15 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? C a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.)
The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 9.7% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1,010, then the YTM for this bond is closest to: A. 11.4% B. 7.6% C. 13.3% D. 9.5%

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