QUESTION 33 Rollins Corporation's bonds have a 12 percent coupon, paid semiannually. It matures in 20...
QUESTION 33
-
Rollins Corporation's bonds have a 12 percent coupon, paid semiannually. It matures in 20 years, and its current market price is $1,000. The maturity value is $1,000. The firm's marginal tax rate is 40 percent. Which of the following is Rollins' after-tax cost of debt?
A. 6.8 percent
B. 7.2 percent
C. 5.3 percent
D. 9.5 percent
E. 8.4 percent
Homework Answers
As the bond is trading at par, YTM and coupon rate will be same.
Using the formula for calculating YTM,
YTM =(Coupon + (Face value - Price)/n)/ (Face value +Price )/2
Coupon = 12% of 1000 = 120. The semi-annual coupon is 60
Face value = Price = 1000.
n = 20*2 = 40 periods.
YTM = (60+ (1000-1000)/40))/(1000+1000)/2 = 60/1000 = 0.06 or 6%
The annual YTM is 6 % * 2 = 12%.
After tax cost of debt = 12*(1-tax rate) =12*(1-0.40)= 12*0.60 = 7.2%
Add Answer to:
QUESTION 33
Rollins Corporation's bonds have a 12 percent coupon, paid
semiannually. It matures in 20...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent...
Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 9.5 percent coupon, paid semiannually, a current maturity of 20 years, and sell for the par value, $1,000. The firm's marginal tax rate is 37 percent. What is Rollins' component after-tax cost of debt? Express your answer in percentage (without the % sign) and round it to two decimal places.
Calculate the yield to maturity on the following bonds: a. A 8.2 percent coupon (paid semiannually)...
Calculate the yield to maturity on the following bonds: a. A 8.2 percent coupon (paid semiannually) bond, with a $1,000 face value and 22 years remaining to maturity. The bond is selling at $895. b. An 5.3 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $915. c. An 7.3 percent coupon (paid annually) bond, with a $1,000 face value and 8 years remaining to maturity. The bond...
Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.50% coupon paid semiannually (4.25%...
Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.50% coupon paid semiannually (4.25% each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell?
Question 12 5 pts Moody Corporation's bonds have a 15-year maturity, a 7.25% coupon paid semiannually,...
Question 12 5 pts Moody Corporation's bonds have a 15-year maturity, a 7.25% coupon paid semiannually, and a par value of $1,000. If the going market interest rate for bonds of similar risk and maturity is 5.10% (based on semiannual compounding), what is the bond's price? Your answer should be between 1075.00 and 1275.00, rounded to 2 decimal places, with no special characters. Question 13 5 pts MacBook Air
Question 12 5 pts Moody Corporation's bonds have a 15-y naturity, a 7.25% coupon paid semiannually,...
Question 12 5 pts Moody Corporation's bonds have a 15-y naturity, a 7.25% coupon paid semiannually, and a par value of $1,000. If the going market interest rate for bonds of similar risk and maturity is 5.50% (based on semiannual compounding), what is the bond's price? Your answer should be between 1075.00 and 1275.00, rounded to 2 decimal places, with no special characters Question 13 5 pts
1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10...
1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10 years at $1,000. If the investor's required rate of return is 14 percent, what should the current market price of the bonds be? 2. North Pole Air has an issue of preferred stock outstanding that pays dividends of $8.50 annually. The par value of each preferred share is $100. Investors require a 12.25 percent rate of return on this stock. The next annual dividend...
1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10...
1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10 years at $1,000. If the investor's required rate of return is 14 percent, what should the current market price of the bonds be? 2. North Pole Air has an issue of preferred stock outstanding that pays dividends of $8.50 annually. The par value of each preferred share is $100. Investors require a 12.25 percent rate of return on this stock. The next annual dividend...
4. An Earl Enterprises bond has an 8 percent coupon, pays interest semiannually, and matures in...
4. An Earl Enterprises bond has an 8 percent coupon, pays interest semiannually, and matures in six years at $1,000. If the current market price is $911.33, what is the yield to maturity for this bond?
Niendorf Corporation's 25-year maturity bonds have an 8.75% coupon rate with interest paid semiannually, and a...
Niendorf Corporation's 25-year maturity bonds have an 8.75% coupon rate with interest paid semiannually, and a par value of $1,000. The bonds are currently selling at a premium price of $1,250 in the bond market. What is their yield to maturity (YTM)? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.
Colton Corporation's semiannual bonds have a 12-year maturity, an 9.90% nominal coupon paid semiannually. and sell...
Colton Corporation's semiannual bonds have a 12-year maturity, an 9.90% nominal coupon paid semiannually. and sell at their $1,000 par value. The firm's annual bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. To provide the same effective annual yield (EFF%), at what price should the annual payment bonds sell? Hint: Calculate the EFF% for the semiannual bond's coupon rate, and then use it as the YTM...
Calculate the yield to maturity on the following bonds: a. A 8.2 percent coupon (paid semiannually) bond, with a $1,000 face value and 22 years remaining to maturity. The bond is selling at $895. b. An 5.3 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $915. c. An 7.3 percent coupon (paid annually) bond, with a $1,000 face value and 8 years remaining to maturity. The bond...
Question 12 5 pts Moody Corporation's bonds have a 15-year maturity, a 7.25% coupon paid semiannually, and a par value of $1,000. If the going market interest rate for bonds of similar risk and maturity is 5.10% (based on semiannual compounding), what is the bond's price? Your answer should be between 1075.00 and 1275.00, rounded to 2 decimal places, with no special characters. Question 13 5 pts MacBook Air
Question 12 5 pts Moody Corporation's bonds have a 15-y naturity, a 7.25% coupon paid semiannually, and a par value of $1,000. If the going market interest rate for bonds of similar risk and maturity is 5.50% (based on semiannual compounding), what is the bond's price? Your answer should be between 1075.00 and 1275.00, rounded to 2 decimal places, with no special characters Question 13 5 pts
1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10 years at $1,000. If the investor's required rate of return is 14 percent, what should the current market price of the bonds be? 2. North Pole Air has an issue of preferred stock outstanding that pays dividends of $8.50 annually. The par value of each preferred share is $100. Investors require a 12.25 percent rate of return on this stock. The next annual dividend...
1. A corporate bond has a 12 percent coupon, pays interest semiannually, and matures in 10 years at $1,000. If the investor's required rate of return is 14 percent, what should the current market price of the bonds be? 2. North Pole Air has an issue of preferred stock outstanding that pays dividends of $8.50 annually. The par value of each preferred share is $100. Investors require a 12.25 percent rate of return on this stock. The next annual dividend...
4. An Earl Enterprises bond has an 8 percent coupon, pays interest semiannually, and matures in six years at $1,000. If the current market price is $911.33, what is the yield to maturity for this bond?
Colton Corporation's semiannual bonds have a 12-year maturity, an 9.90% nominal coupon paid semiannually. and sell at their $1,000 par value. The firm's annual bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. To provide the same effective annual yield (EFF%), at what price should the annual payment bonds sell? Hint: Calculate the EFF% for the semiannual bond's coupon rate, and then use it as the YTM...
Most questions answered within 3 hours.
-
An average is an attempt to summarize a collection of data into
just one number. Discuss...
asked 16 minutes ago -
explain in details 250words please
The Effects of the Age Discrimination in Employment Act
(1967)
asked 3 minutes ago -
x1 = 1, y1 = 2
x2 = 2, y2 = 3
x3 = 3, y3...
asked 13 minutes ago -
A company's average cost per unit when x units are
produced is defined to be
Average...
asked 21 minutes ago -
which of the following steps is found in dengue virus
replication but not Poliovirus replication?
1....
asked 18 minutes ago -
What is the final velocity of a solid sphere that rolls without
slipping down a 4.1...
asked 18 minutes ago -
A ________________________________ is a range of values within
which it is probable that the true value...
asked 21 minutes ago -
A Co|Co2+ ||
Au+|Au galvanic cell
is constructed in which the standard cell voltage is
1.96...
asked 22 minutes ago -
a) An alternating current I(t)=I0 Cos wt flows
through a large circular wire loop of radius...
asked 35 minutes ago -
The intensity (flux) measured from a distant star is 5.2 x 10-7
W/m2. The wavelength of...
asked 34 minutes ago -
At
target practice, a person aims the gun horizontally at a target at
distance, D, away....
asked 37 minutes ago -
Suppose babies born in a large hospital have a mean weight of
3685 grams, and a...
asked 39 minutes ago