Opelika Inc., a U.S. multinational corporation issued a 25-year 8% semiannual bond 9 years ago in the global market. The bond currently sells for $1,020 per bond. If the company's marginal tax rate is 40%, what is the yield to maturity on the bond and the after-tax cost of debt to the company? (Rounded)

Opelika Inc., a U.S. multinational corporation issued a 25-year 8% semiannual bond 9 years ago in the global market. The bond currently sells for $1,020 per bond. If the company's marginal tax rate is 40%, what is the yield to maturity on the bond and the after-tax cost of debt to the company? (Rounded)

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Description: Opelika Inc., a U.S. multinational corporation issued a 25-year 8% semiannualbond 9 years ago in the global market. The bond currently sells for $1,020 perbond. If the company's marginal tax rate is 40%, what is the yield to maturity onthe bond and

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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Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. a. What is the pre-taxed cost of debt? b. What is the after tax cost of debt? c. Which is more relevant, the pre-tax or the after- tax cost of debt? Why?
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table bel If the corporate tax rate is 22 percent, what is the aftertax cost of the company's debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Aftertax cost of debt
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QUESTION TWO A large Bahraini company issued BD10,000, 10%, 10-year bonds that paid interest semi- annually. You bought the bonds for BD9,000 per bond. What was your yield to maturity? (Be careful.) What is the company's after tax cost of debt if the corporate tax rate is 30%?
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To help finance a major expansion, a company sold a noncallable bond several years ago that now has 14 years to maturity. This bond has a 14.00% annual coupon, paid semiannually, sells at a price of $1,400, and has a par value of $1,000. If the firm's tax rate is 21%, what is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations. 8.94% 7.06% 3.53%
14
What will be the cost of a bond issue after tax by the company XYZ SA, if the country has a tax rate of 20%, a nominal value of US $ 2,500.00, market value of 99.50%, interest rate of 10.50%, financial expenses for placement of 0.75% and it is a 10-year issue:
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