Homework Help is Here – Start Your Trial Now!
Business
Finance
XYZ has an outstanding bond. It's a 6% semiannual coupon bond maturing in 4 years with a par value of $100 and is trading at $90. Income tax rate is 25%.  Calculate the after-tax cost of debt for XYZ. Group of answer choices 4.06% 4.64% 6.38% 6.77%

XYZ has an outstanding bond. It's a 6% semiannual coupon bond maturing in 4 years with a par value of $100 and is trading at $90. Income tax rate is 25%.  Calculate the after-tax cost of debt for XYZ. Group of answer choices 4.06% 4.64% 6.38% 6.77%

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

XYZ has an outstanding bond. It's a 6% semiannual coupon bond maturing in 4 years with a par value of $100 and is trading at $90. Income tax rate is 25%. 

Calculate the after-tax cost of debt for XYZ.

Group of answer choices
4.06%
4.64%
6.38%
6.77%
Expert Solution
Step 1

YTM is the rate of return which the bondholders received at the time of maturity.

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Accounting for Long-term liabilities
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