The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 15 percent higher; that is, firms that paid 11 percent for debt last year will be paying 12.65 percent this year. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on its cost last year and the 15 percent increase? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in political activities), what would the aftertax cost of debt be? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.
The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 15 percent higher; that is, firms that paid 11 percent for debt last year will be paying 12.65 percent this year. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on its cost last year and the 15 percent increase? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in political activities), what would the aftertax cost of debt be? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.
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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am. 112.
Transcribed Image Text:The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 9 percent to help finance a new playground facility in Los Angeles. This year the cost of
debt is 15 percent higher; that is, firms that paid 11 percent for debt last year will be paying 12.65 percent this year. If the Goodsmith Charitable Foundation borrowed
money this year, what would the aftertax cost of debt be, based on its cost last year and the 15 percent increase? Note: Do not round intermediate calculations. Input your
answer as a percent rounded to 2 decimal places. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 35 percent because of involvement in
political activities), what would the aftertax cost of debt be? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.
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