Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 4QAP
Summary Introduction
Adequate information:
Book value of debt issue
Book value of zero-coupon bond issue
Market value over book value for debt issue (A) = 68%
Market value over book value for zero-coupon bond issue (B) = 106%
Face value = $1,000
Price = $680
Term duration = 9 years
Number of compounding periods in a year = 2
Tax rate = 22%
To compute: Total book value of debt, the total market value of debt, and after-tax cost of debt.
Introduction: Cost of debt refers to the interest payments made by the borrower on the debt such as bonds.
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Chapter 13 Solutions
Corporate Finance
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