Question

Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below.

Bond	Coupon Rate	Price Quote	Maturity	Face Value
1	8.90%	105.9	3 years	$29,000,000
2	6.40	94.5	6 years	49,000,000
3	8.60	104.7	13.5 years	54,000,000
4	9.10	94.5	23 years	69,000,000

If the corporate tax rate is 24 percent, what is the aftertax cost of the company’s debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

D2 X A B F fix =C2/$C$14 co Market value arket value weights 30,711,000 0.1545 1 Bond 2) 11 $ Book value M 29,000,000 $ After tax cost (YTM) 5.09% =RATE(3*2,89/2,-1059,1000,0)*2*(1-24%) Weighted cost 0.79% 4 2 $ 49,000,000 $ 46,305,000 0.2330 1.34% 5 6 5.74% ERATE(6*2,64/2,-945,1000,0)*2*(1-24%) $ 56,538,000 0.2845 1.73% 6.10% ERATE(13.5*2,86/2,-1047,1000,0)*2*(1-24%) $ 65,205,000 0.3281 24204 8 3 $ 54,000,000 9 10 11 4 $ 69,000,000 12 13 14 Total $ 201,000,000.00 15 7.37% =RATE(23*2,91/2,-945,1000,0)*2*(1-24%) $ 198,759,000.00 1.0000 16 Cost of debt 6.28%

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