Want to this question answer general Accounting Pacific Technologies has a $40 million bond issue outstandingwith a coupon rate of 7.5% and a current yield of 7.2%. If thecompany's tax rate is 30%, what is the present value of the taxshield?

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Answered: Pacific Technologies has a $40 million…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ans?? General Accounting
Arnell Industries has 5.5 million in permanent debt outstanding. The firm will pay interest only on this debt. Arnell's marginal tax rate is expected to be 40% for the foreseeable future. a. Suppose Arnell pays interest of 9% per year on its debt. What is its annual interest tax shield? b. What is the present value of the interest tax shield, assuming its risk is the same as the loan? c. Suppose instead the interest rate on the debt were 7%. What is the present value of the interest tax shield in this case?
Laurel, Inc., has debt outstanding with a coupon rate of 5.8%and a yield to maturity of 7.1%.Its tax rate is 38%.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.
Laurel, Inc., has debt outstanding with a coupon rate of 5.8% 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 and 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.)
What is the after tax cost of debt if the company's bond with a coupon rate of 9% is selling above par at $1050,and the bond will mature in 19 years. The firm's tax bracket is 30%. (L1).
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The coupon rate on a debt issue is 6%. If the yield to maturity on the debt is 9%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 21%?
Laurel, Inc., has debt outstanding with a coupon rate of 6.1% and a yield to maturity of 7.2%. 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.)
Suppose SnowWhite's common stock has a beta of 1.37, the risk-free rate is 3.4 percent, and the market risk premium is 8.2 percent. SnowWhite has equity with a market value of $1 million and debt with a market value of $ 0.45 million. The cost of debt is 7.6 percent. What is the WACC if the tax rate is 23 percent and all interest is tax deductible?
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Pacific Technologies has a $40 million bond issue outstanding with a coupon rate of 7.5% and a current yield of 7.2%. If the company's tax rate is 30%, what is the present value of the tax shield?