Homework Answers
| Coupon Dollar =8%*1000 | $80 | ||||||||||
| Flotation Cost in dollars (FC) | $20 | (2%*1000) | |||||||||
| Term in years | 10 | ||||||||||
| Price | $980 | ||||||||||
| Net Proceeds (980-20) | $960 | ||||||||||
| Pv | Net Proceeds | $960 | |||||||||
| Nper | Number of Years | 10 | |||||||||
| Pmt | Annual Coupon | $80 | |||||||||
| Fv | Terminal payment on maturity | $1,000 | |||||||||
| RATE | Before tax cost of capital | 8.61% | (Using RATE function of excel with Nper=10, Pmt=80, Pv=-960, Fv=1000) | ||||||||
| rd=Before tax cost of capital | 8.61% | ||||||||||
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Click to see additional instructions A 10-year $1,000 bond sells for $980, and the flotation costs...
Click to see additional instructions A 10-year $1,000 bond sells for $980, and the flotation costs are 2 % of the p...
Click to see additional instructions A 10-year $1,000 bond sells for $980, and the flotation costs are 2 % of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (I) Flotation costs in dollars (FC) = term (n) Price (P) Net proceeds (N p) = % = PJ
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par...
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (I) = Flotation costs in dollars (FC) = term (n) = Price (P) = Net proceeds (N_p) = rd = %
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par...
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (1) = Flotation costs in dollars (FC) = term (n) = Price (P) = Net proceeds (N_p) = Pa=
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects...
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable growth to be 3% a year. It sold 100 20-year corporate bonds with a $10,000 par value and a 4% coupon rate at the market price of $10,200. The flotation cost is 2% of par value The corporate income tax rate is 25%. It issued 100,000 new preferred shares at $10.30/share. It promises a $0.60/share annual dividend. The flotation cost is $0.30/share....
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects...
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable growth to be 3% a year. It sold 100 20-year corporate bonds with a $10,000 par value and a 4% coupon rate at the market price of $10,200. The flotation cost is 2% of par value. The corporate income tax rate is 25% It issued 100,000 new preferred shares at $10.30/share. It promises a $0.60/share annual dividend. The flotation cost is $0.30/share....
Black Hill Inc. sells $100 million worth of 23-year to maturity 14.94% annual coupon bonds. The...
Black Hill Inc. sells $100 million worth of 23-year to maturity 14.94% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $977 for each $1,000 bond. What is the before-tax cost of capital for this debt financing? Round the answer to two decimal places in percentage form.
Great Seneca Inc. sells $100 million worth of 19-year to maturity 9.56% annual coupon bonds. The...
Great Seneca Inc. sells $100 million worth of 19-year to maturity 9.56% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $995 for each $1,000 bond. The firm's marginal tax rate is 35%. What is the after-tax cost of capital for this debt financing?
Great Seneca Inc. sells $100 million worth of 27-year to maturity 14.39% annual coupon bonds. The...
Great Seneca Inc. sells $100 million worth of 27-year to maturity 14.39% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $981 for each $1,000 bond. The firm's marginal tax rate is 40%. What is the after-tax cost of capital for this debt financing?
6.4%, paid semi-annually Suppose a company issues 10 year debt with a par value of $1,000...
6.4%, paid semi-annually
Suppose a company issues 10 year debt with a par value of $1,000 and a coupon rate of 6.4%, paid semi-ar The issue price will be $980. The tax rate is 30%. If the flotation costs are 4.5% of the issue proceeds, For the avoidance of doubt, assume the flotation costs are more than de minimis. a. What is the company's pre-tax cost of debt? a. What is the company's after-tax cost of debt?
(Individual or component costs of capital) Compute the cost of the following: a. A bond that...
(Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has $1,000 par value (face value) and a contract
or coupon interest rate of 8 percent. A new issue would have a
floatation cost of 8 percent of the $1,145 market value. The bonds
mature in 14 years. The firm's average tax rate is 30 percent and
its marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.40...
Click to see additional instructions A 10-year $1,000 bond sells for $980, and the flotation costs are 2 % of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (I) Flotation costs in dollars (FC) = term (n) Price (P) Net proceeds (N p) = % = PJ
A 10-year $1,000 bond sells for $980, and the flotation costs are 2% of the par value. The coupon rate is 8%. Put in the values of the variables and calculate the before-tax cost of capital from this bond? Coupon dollars (1) = Flotation costs in dollars (FC) = term (n) = Price (P) = Net proceeds (N_p) = Pa=
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable growth to be 3% a year. It sold 100 20-year corporate bonds with a $10,000 par value and a 4% coupon rate at the market price of $10,200. The flotation cost is 2% of par value The corporate income tax rate is 25%. It issued 100,000 new preferred shares at $10.30/share. It promises a $0.60/share annual dividend. The flotation cost is $0.30/share....
Click to see additional instructions Suppose a company raised $3,000,000 to fund its expansion. It expects the sustainable growth to be 3% a year. It sold 100 20-year corporate bonds with a $10,000 par value and a 4% coupon rate at the market price of $10,200. The flotation cost is 2% of par value. The corporate income tax rate is 25% It issued 100,000 new preferred shares at $10.30/share. It promises a $0.60/share annual dividend. The flotation cost is $0.30/share....
6.4%, paid semi-annually
Suppose a company issues 10 year debt with a par value of $1,000 and a coupon rate of 6.4%, paid semi-ar The issue price will be $980. The tax rate is 30%. If the flotation costs are 4.5% of the issue proceeds, For the avoidance of doubt, assume the flotation costs are more than de minimis. a. What is the company's pre-tax cost of debt? a. What is the company's after-tax cost of debt?
(Individual
or component costs of
capital)
Compute the cost of the following:
a. A bond that has $1,000 par value (face value) and a contract
or coupon interest rate of 8 percent. A new issue would have a
floatation cost of 8 percent of the $1,145 market value. The bonds
mature in 14 years. The firm's average tax rate is 30 percent and
its marginal tax rate is 34 percent.
b. A new common stock issue that paid a $1.40...
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