Your firm is in the 34 percent tax bracket. The yield to maturity on your existing bonds is 8 percent. The state of Georgia offers to loan your firm $1,000,000 with a two year amortizing loan at a 5 percent rate of interest and annual payments due at the end of the year. The interest will be deductible at the time that you pay. What is the APV of this below-market loan to your firm? I did not round any of my intermediate steps. You might be a little bit off. Pick the answer closest to yours. $64,157.38 $417,201.05 $840,797 none of the options

Your firm is in the 34 percent tax bracket. The yield to maturity on your existing bonds is 8 percent. The state of Georgia offers to loan your firm $1,000,000 with a two year amortizing loan at a 5 percent rate of interest and annual payments due at the end of the year. The interest will be deductible at the time that you pay. What is the APV of this below-market loan to your firm? I did not round any of my intermediate steps. You might be a little bit off. Pick the answer closest to yours. $64,157.38 $417,201.05 $840,797 none of the options

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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Yosemite Corporation has an outstanding debt of $10.03 million on which it pays a 5 percent fixed interest rate annually. Yosemite just made its annual interest payment and has three years remaining until maturity. Yosemite believes that interest rates will fall over the next three years and that floating-rate debt will allow it to reduce its overall borrowing costs. A bank offers Yosemite a three-year interest rate swap with annual payments in which Yosemite will pay LIBOR, currently at 4.2 percent, and receive a 3.7 percent fixed rate on $10.03 million notional principal. Suppose that LIBOR turns out to be 3.6 percent in one year and 3.3 percent in two years. Including Interest payments on Yosemite's outstanding debt and payments on the swap, what will be Yosemite's net interest payments for the next three years? Note: Negative values should be indicated by parentheses. Answer is complete but not entirely correct. Net Interest Payments Year 11 $ (180,540) Year 21 $ (120,360) Year 3 $…
Hello. I need help with the following question please. To calculate the after-tax cost of debt, multiply the before-tax cost of debt by(1 – T) . Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 45%. OCP’s after-tax cost of debt is 5.34% (rounded to two decimal places). At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 3.83% 5.75% 4.79% 4.31%
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Am. 101.
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Ali borrowed $3000 from the bank, payable in six equal end-of-year payments at 8%. The bank agreed to reduce the interest on the loan if interest rates declined in the country before the loan was fully repaid. At the end of 3 years, at the time of the third payment, the bank agreed to reduce the interest rate from 8% to 7% on the remaining debt. What was the amount of the equal annual end-of-year payments for each of the first 3 years? And What was the amount of the equal annual ?end-of-year payments for each of the last 3 years .A and $627.28 $648.90 .B and $637.28 $648.90 .C

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