suppose a company will issue new 20-year debt with a par value of $1,000 and a...
suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The issue price will be $1,000. The tax rate is 40%. If the flotation cost is 4% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimal places. %
What if the flotation costs were 10% of the bond issue? Round your answer to two decimal places. %
Homework Answers
here amortization is not
considered because as it is stipulated in the problem.
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suppose a company will issue new 20-year debt with a par value
of $1,000 and a...
The Cost of Debt and Flotation Costs
Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The tax rate is 35%. If the flotation cost is 5% ofthe issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimalplaces.
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?
Jana issues 30-year debt with a par value of $1,000 and a coupon rate of 10%,...
Jana issues 30-year debt with a par value of $1,000 and a coupon rate of 10%, paid annually. If flotation costs are 2%, what is the after-tax cost of debt for the new bond issue? tax rate 40%
Currently, Warren Industries can sell 15 – year, $1,000-par-value bonds paying annual interest at a 9%...
Currently, Warren Industries can sell 15 – year, $1,000-par-value bonds paying annual interest at a 9% coupon rate. Because current market rates for similar bonds are just under 9%, Warren can sell its bonds for $1,040 each; Warren will incur flotation costs of $25 per bond. The firm is the 21% tax bracket. a. The net proceeds from the sale of the bond, Upper N Subscript d is$ . (Round to the nearest dollar.) b. Using the bond's YTM, the...
Several years ago the Pettijohn Company sold a $1,000 par value, noncallable bond that now has...
Several years ago the Pettijohn Company sold a $1,000 par value, noncallable bond that now has 15 years to maturity and a 8.00% annual coupon that is paid semiannually. The bond currently sells for $950, and the company’s tax rate is 25%. To issue new bonds, Pettijohn would incur 3% flotation costs. What is the component cost of debt for use in the WACC calculation? Enter your answer rounded to two decimal places. Do not enter % in the answer...
(Cost of debt) Carraway Seed Company is issuing a $1,000 par value bond that pays 8...
(Cost of debt) Carraway Seed Company is issuing a $1,000 par value bond that pays 8 percent annual interest and matures in 15 years. Investors are willing to pay $950 for the bond. Flotation costs will be 13 percent of market value. The company is in a 20 percent tax bracket. What will be the firm's after-tax cost of debt on thebond? The firm's after-tax cost of debt on the bond will be %. (Round to two decimal places.)
ebook Bond Yield and Alter Tax Cost of Debt A company's 7% coupon rate, semiannual payment,...
ebook Bond Yield and Alter Tax Cost of Debt A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $585.98. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to two decimal places Check My Work (3 remaining) eBook H Problem Walk Through Cost of...
20. A company has a tax rate of 40%. The Cost of a New 30-Year Debt...
20. A company has a tax rate of 40%. The Cost of a New 30-Year Debt sold at Par = $1,000, Coupon = 10% paid annually, and Flotation cost of 8% is: a. 10.91% b. 6.55% c. 6.37% d. 8.56% e. 7.84% 21. A company has a tax rate of 40%. The Cost of a New 30-Year Debt sold at Par = $1,000, Coupon = 10% paid annually, and Flotation cost of 2% is: a. 10.91% b. 6.12% c. 6.55%...
The required return (or cost) of previously issued debt is often referred to as the projected rate. It usually differs...
The required return (or cost) of previously issued debt is often referred to as the projected rate. It usually differs from the cost of newly raised financial capital. Consider the case of Peaceful Book Binding Company: Peaceful Book Binding Company is considering issuing a new twenty-five-year debt issue that would pay an annual coupon payment of $75. Each bond in the issue would carry a $1,000 par value and would be expected to be sold for a market price equal...
A company's 6% coupon rate, semiannual payment, $1,000 par value bond that matures in 20 years...
A company's 6% coupon rate, semiannual payment, $1,000 par value bond that matures in 20 years sells at a price of $604.27. The company's federal-plus-state tax rate is 40%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to two decimal places.
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?
ebook Bond Yield and Alter Tax Cost of Debt A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $585.98. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.) Round your answer to two decimal places Check My Work (3 remaining) eBook H Problem Walk Through Cost of...
20. A company has a tax rate of 40%. The Cost of a New 30-Year Debt sold at Par = $1,000, Coupon = 10% paid annually, and Flotation cost of 8% is: a. 10.91% b. 6.55% c. 6.37% d. 8.56% e. 7.84% 21. A company has a tax rate of 40%. The Cost of a New 30-Year Debt sold at Par = $1,000, Coupon = 10% paid annually, and Flotation cost of 2% is: a. 10.91% b. 6.12% c. 6.55%...
The required return (or cost) of previously issued debt is often referred to as the projected rate. It usually differs from the cost of newly raised financial capital. Consider the case of Peaceful Book Binding Company: Peaceful Book Binding Company is considering issuing a new twenty-five-year debt issue that would pay an annual coupon payment of $75. Each bond in the issue would carry a $1,000 par value and would be expected to be sold for a market price equal...
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