Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 11, Problem 2P
Summary Introduction
To calculate: The after-tax cost of debt
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
After-Tax Cost of Debt
LL Incorporated's currently outstanding 11% coupon bonds have a yield to maturity of 8.3%. 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 Holmes Company's currently outstanding bonds have a 7% coupon and a 13% yield to maturity. Holmes 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 Holmes' after-tax cost of debt? Round your answer to two decimal places.
%
The Holmes Company’s currently outstanding bonds havean 8% coupon and a 10% yield to maturity. Holmes believes it could issue new bonds atpar that would provide a similar yield to maturity. If its marginal tax rate is 40%, what isHolmes’ after-tax cost of debt?
Chapter 11 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 11 - Define each of the following terms:
Weighted...Ch. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Distinguish between beta (i.e., market) risk,...Ch. 11 - Suppose a firm estimates its overall cost of...Ch. 11 - 11-1 After-Tax Cost of Debt
Calculate the...Ch. 11 - Prob. 2PCh. 11 - Cost of Preferred Stock
Duggins Veterinary...Ch. 11 - Prob. 4PCh. 11 - Prob. 5P
Ch. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Bond Yield and After-Tax Cost of Debt A companys...Ch. 11 - Prob. 10PCh. 11 - Prob. 11PCh. 11 - Calculation of gL and EPS Spencer Suppliess stock...Ch. 11 - The Cost of Equity and Flotation Costs
Messman...Ch. 11 - Prob. 14PCh. 11 - WACC Estimation
On January 1, the total market...Ch. 11 - Prob. 16PCh. 11 - During the last few years, Jana Industries has...Ch. 11 - What is the market interest rate on Jana’s debt,...Ch. 11 - Prob. 3MCCh. 11 - Prob. 4MCCh. 11 - Prob. 5MCCh. 11 - Prob. 6MCCh. 11 - Prob. 7MCCh. 11 - Prob. 8MCCh. 11 - Prob. 9MCCh. 11 - Prob. 10MCCh. 11 - What procedures can be used to estimate the...Ch. 11 - Prob. 12MCCh. 11 - Prob. 13MCCh. 11 - Prob. 14MCCh. 11 - What four common mistakes in estimating the WACC...
Knowledge Booster
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
- LL Incorporated's currently outstanding 10% coupon bonds have a yield to maturity of 7.5%. 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. ________ %arrow_forwardThe Holmes Company's currently outstanding bonds have a 9% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.arrow_forwardLadder Works has debt outstanding with a coupon rate of 6 percent and a yield to maturity of 6.8 percent. What is the aftertax cost of debt if the tax rate is 21 percent? Assume all interest is tax deductible. 5.62% 5.82% 5.37% 4.86%arrow_forward
- LL Incorporated’s currently outstanding 7 percent coupon bonds have a yield to maturity of 6 percent. LL believes it could sell new bonds that would provide a similar yield to maturity. If its marginal tax rate is 34 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.arrow_forwardThe yield to maturity is 10%. The.corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds? O 5.28% O 248% O 6.90% O 3.14%arrow_forwardHome Depot has debt outstanding with a face value of $30 billion. The coupon rate on these bonds is 6.2%. The current yield-to-maturity (YTM) on these bonds is 7.8%. Home Depot's tax rate is 26%. What is the effective cost of debt of Home Depot? OA. 9.83% OB. 6.20% OC. 4.59% OD. 5.77% OE. 7.80%arrow_forward
- Cost of debtarrow_forwardBeckham Corporation has semiannual bonds outstanding with 15 years to maturity and the bonds are currently priced at $846.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? 5.283% 6.868% 10.401% 7.655%arrow_forwardSimple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and a yield to maturity of 5.7%. Simple Corp.'s average tax rate is 18% and its marginal tax rate is 29%. What is the (pre-tax) cost of debt?arrow_forward
- A firm has an outstanding bond paying a coupon rate of 12%. The firm's tax rate is 34%. If the yield-to-maturity on the bond is 6.18%, what is the firm's after-tax cost of debt? Select one: A. 12.00% B. 4.08% C. 7.92% D. 6.18%arrow_forwardNotable nothings plans to issue new bonds with the same yield as its existing bonds. the existing bonds have a coupon rate of interest equal to 5.6 percent (semiannual interest payments), 12 years remaining until maturity, and a $1,000 maturity value; they are currently selling for $918 each. (a) if notable issues new bonds today, what will its before-tax cost of debt be? (b) what will be its before-tax cost of debt if the price of its existing bonds is $730 when notable issues the new bondsarrow_forwardThe coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 10%. The corporate tax rate is 35%. What would be the approximate after-tax cost of debt for a new issue of bonds? (Round your answer to decimal places.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial leverage explained; Author: The Finance story teller;https://www.youtube.com/watch?v=GESzfA9odgE;License: Standard YouTube License, CC-BY