Homework Help is Here – Start Your Trial Now!
Business
Finance
Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt 8.84-1% %

Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt 8.84-1% %

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question

Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt Explanation Solve {$970=$83.00×[1-1/(1+iD)^8/]+iD$1,000(1+iD)8} for iD Yields iD=0.088388, or 8.84%. \table[[A,B,C,],[1,Maturity,8,],[2,Price,97%,$29,100,000.00

Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? ed Note: Round your answer to 2 decimal places. Cost of debt 8.84+1-1% % Explanation Solve {5970- Yields ip $970 = $83.00 X (1+ip) iD + $1,000 (1+ip) for = 0.088388, or8.84%. 1 A Maturity 2 Price 3 FV 4 Coupon 5 ID .D B C 8 97% $ 29,100,000.00 $ 3,000,000.00 8.30% 8.84% $ 2,490,000.00 =RATE (B1, C4,-C2, B3)
Transcribed Image Text:Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? ed Note: Round your answer to 2 decimal places. Cost of debt 8.84+1-1% % Explanation Solve {5970- Yields ip $970 = $83.00 X (1+ip) iD + $1,000 (1+ip) for = 0.088388, or8.84%. 1 A Maturity 2 Price 3 FV 4 Coupon 5 ID .D B C 8 97% $ 29,100,000.00 $ 3,000,000.00 8.30% 8.84% $ 2,490,000.00 =RATE (B1, C4,-C2, B3)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Bonds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS