You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 11.00 percent semiannual couponbonds are selling at a price of $1,229. Assuming that these bonds are the only debt outstanding for the firm.Problem 13.19 a1-a3(a1)Your answer is correct.What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and finalanswer to 2 decimal places, e.g. 15.25%.)YTMeTextbook and MediaProblem 13.19 a1-a3(a2)Your answer is incorrect.8 %After-tax cost of debtWhat is the after-tax cost of debt for this firm if it has a marginal tax rate of 34 percent? (Round final answer to 2 decimalplaces, e.g. 15.25%.)Attempts: 1 of 3 used%

Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…

You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 11.00 percent semiannual coupon bonds are selling at a price of $1,229. Assuming that these bonds are the only debt outstanding for the firm.

You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 11.00 percent semiannual coupon bonds are selling at a price of $1,229. Assuming that these bonds are the only debt outstanding for the firm.

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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Please answer the following, based on the information provided for the firm ABC: the company finances its operations and growth opportunities, using common equity, debt, and preferred equity. It issued a 10 year, 6 percent (coupon rate of 6%) bonds 3 years ago. This annual-coupon bond is currently selling for $980, and its face value is $1000. What comes closest to ABC's pre-tax cost of debt? O O O O O 5% 3% 4% 8% 6%
Beckham Corporation has semiannual bonds outstanding with nine years to maturity that are currently priced at $794.08. If the bonds have a coupon rate of 6 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 27 percent? Complete the calculation as is done on Wall Street. none of these 7.06% 9.45% 7.28% 6.89%
A) For questions A, B, and C, use the following information: Consider a firm whose debt has a market value of $35 million and whose stock has a market value of $55 million. The firm pays a 7 percent rate of interest on its new debt and has a beta of 1.23. The corporate tax rate is 21%. Assume that the security market line holds, that the risk premium on the market is 10.5 percent, and that the current Treasury bill is rate is 1 percent. What is the aftertax cost of debt? Format as a percentage and round to two places past the decimal point as "X.XX B) Consider a firm whose debt has a market value of $35 million and whose stock has a market value of $55 million. The firm pays a 7 percent rate of interest on its new debt and has a beta of 1.23. The corporate tax rate is 21%. Assume that the security market line holds, that the risk premium on the market is 10.5 percent, and that the current Treasury bill is rate is 1 percent. Using the pretax cost of debt from Question 7, what is the…
To help finance a major expansion, a company sold a noncallable bond several years ago that now has 15 years to maturity. This bond has a 5% annual coupon, paid semiannually, it sells at a price of $985, and it has a par value of $1,000. If the company’s tax rate is 28%, what component cost of debt should be used in the WACC calculation?
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 9.5 percent coupon, paid semiannually, a current maturity of 20 years, and sell for the par value, $1,000. The firm's marginal tax rate is 30 percent.What is Rollins' component after-tax cost of debt? Express your answer in percentage (without the % sign) and round it to two decimal places
5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,000 face value and an 8% coupon, semiannual payment ($40 payment every 6 months). The bonds currently sell for $894.87. If the firm's marginal tax rate is 25%, what is the firm's after-tax cost of debt? Do not round intermediate calculations. Round your answer to two decimal places.
LL Incorporated’s currently outstanding 7 percent coupon bonds have a yield to maturity of 11 percent. LL believes it could sell new bonds that would provide a similar yield to maturity. If its marginal tax rate is 33 percent, what is LL’s after-tax cost of debt? Express your answer in percentage (without the % sign) and round it to two decimal places
A firm has 4000m in balance sheet debt (book value is equal to market value in this case) and 1000m in capitalized leases. Market value of equity is 10000m. You can use book value of debt to approximate its market value. If you were to use this information in the calculation of WACC, what is Wd? O 40.00% O 28.57% O 33.33% O 50.00%
. ABC Co. has $15 million of debt outstanding with a coupon rate of 9%. Currently, the yield to maturity on these bonds is 7%. If the firm’s tax rate is 35%, what is the after-tax cost of debt? A. 10.76% B. 5.85% C. 4.55% D. 5.40%
Cote Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. Bond 1 2 3 4 Coupon Rate 7.50 % 9.00 8.70 8.30 Cost of debt Price Quote 103.48 110.80 110.15 103.05 Maturity 5 years 8 years % 15.5 years 25 years If the corporate tax rate is 34%, what is the after-tax cost of the company's debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Face Value $ 45,000,000 40,000,000 50,000,000 65,000,000
LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 5.7%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt? Round your answer to two decimal places.
The company you work for wants you to estimate the company’s WACC; but before you do so, you need to estimate the cost of debt and equity. You have obtained the following info. 1) the firms non-callable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000 and a market price of $1,225.00. 2) thecompany’s tax rate is 40%. 3) the risk-free rate is 4.50%, the market risk premium 5.50%, and the stocks betta is 1.20. 4) the target capital structure consists of 35% debt and the balance common equity. The firm uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock. Calculate the company’s cost of retained earnings using the CAPM approach.

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