J&R Renovation, Ic., is trying to determine its cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 5 percent annually. a. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 25 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt b. Aftertax cost of debt % %

J&R Renovation, Ic., is trying to determine its cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 5 percent annually. a. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 25 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt b. 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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Micro Spinoffs Incorporated issued 20-year debt a year ago at par value with a coupon rate of 5%, paid annually. Today, the debt is selling at $1,140. If the firm's tax bracket is 21%, what is its percentage cost of debt? Assume a face value of $1,000. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. X Answer is complete but not entirely correct. Cost of debt 3.19 %
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Laurel, Inc., has debt outstanding with a coupon rate of 5.9% and a yield to maturity of 7.1%. Its tax rate is 35%. What is Laurel's effective (after-tax) cost of debt? NOTE: Assume that the debt has annual coupons. Note: Assume that the firm will always be able to utilize its full interest tax shield. The effective after-tax cost of debt is %. (Round to four decimal places.)
Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $21 million in long-term debt. What is the debt ratio? Do not round intermediate calculations. Round your answer to the nearest whole number.
Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 8 years to maturity that is quoted at 103.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 5.2 percent annually. What is the company’s pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. If the tax rate is 21 percent, what is the aftertax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
Edwards Construction currently has debt outstanding with a market value of $75,000. The company has a WACC of 10 percent. Tax rate is 20%. The company just released its EBIT of $8,750 for the preceding financial year (t = 0). What is the debt-to-value ratio if the company’s growth rate is 7 percent? Group of answer choices 0.23 0.3 0.21 0.7
Avicorp has a $10.9 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94.03% of par value. a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 25% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.
K Avicorp has a $11.5 million debt issue outstanding, with a 5.8% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93.67% of par value a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 28% tax rate, what is its after-tax cost of debt? Note Assume that the firm will always be able to utilize its full interest tax shield. BECER a. The cost of debt is % per year. (Round to two decimal places)
Aggarwal Inc. buys on terms of 1/10, net 20, and it always pays on the 20th day. The CFO calculates that the average amount of costly trade credit carried is $750,000. What is the firm's average accounts payable balance? Assume a 365-day year. a. $1,000,000 b. $1,492,500 c. $1,500,000 d. $1,125,000 e. $1,113,750
he Nelson Company has $1,170,000 in current assets and $450,000 in current liabilities. Its initial inventory level is $280,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 2.2? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.
The Nelson Company has $1,137,500 in current assets and $455,000 in current liabilities. Its initial inventory level is $310,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.8? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.
Lever Age pays an 9% rate of interest on $9.70 million of outstanding debt with face value $9.7 million. The firm's EBIT was $2.3 million. a. What is its times interest earned? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Times interest earned 0.03 X b. If depreciation is $170,000, what is its cash coverage ratio? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Cash coverage ratio 0.03 X

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