Bond Par Value = $1,000
Time Period = 5 years
Coupon Rate = 6%
Bond Price = $950
a.
Calculating Yield to Maturity,
Using TVM Calculation,
I = [PV = -950, FV = 1,000, PMT = 30, N = 10]
I = 7.21%
EAR = (1 + 0.0721/2)2 - 1
EAR = 7.34%
Before-tax cost of Debt = 7.34%
b.
After-tax cost of Debt = (1 - 0.40)(0.0734)
After-tax cost of Debt = 4.40%
Problem 12-6 (bookmatch) Question Help • Avicorp has a $10.0 million debt issue outstanding, with a...
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