Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...

Question

Question

Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...

Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds have a coupon rate of 6.5 percent and a yield to maturity of 6.8 percent. The tax rate is 34 percent. What is the present value of the interest tax shield?

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

PV of tax shield = bonds*par value*coupon rate*tax rate/YTM

=5500*2000*0.065*0.34/0.068=3575000

Add a comment

Answer 2

Similar Homework Help Questions

Lyme Home has 5,000 bonds outstanding with a face value of $1,000 each and a coupon...

Lyme Home has 5,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 7.65 percent. Interest is paid semiannually. What is the amount of the annual interest tax shield if the tax rate is 35 percent?
1) New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 20...

1) New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 20 years, and have a 5.8 percent coupon. The current price is quoted at 103.25. What is the yield to maturity? 2) American Hat has $1,000 face value bonds outstanding with a market price of $1,150. The bonds pay interest semiannually, mature in 8 years, and have a yield to maturity of 5.98 percent. What is the current yield? Please explain with simple formula
Your firm has a bond issue with a face value of $710,000 outstanding. These bonds have...

Your firm has a bond issue with a face value of $710,000 outstanding. These bonds have a coupon rate of 6 percent, pay interest semiannually, and have a current market price equal to 98 percent of face value. What is the amount of the annual tax shield on debt given a tax rate of 21 percent? $6,309 $4,502 $13,409 $11,791 $8.946 11 app.honorlock.com is sharing your screen. Stop sharing Hide -Guard™ MacBook Pro Q Search or type URL % X...

AB Builders, Inc., has 25-year bonds outstanding with a par value of $2,000 and a quoted...

AB Builders, Inc., has 25-year bonds outstanding with a par value of $2,000 and a quoted price of 97.511. The bonds pay interest semiannually and have a yield to maturity of 6.83 percent. What is the coupon rate? A) 5.96% B) 6.62% C) 6.29% D) 9.93% E) 13.24%
AB Builders, Inc. has 12-year bonds outstanding with a face value of $1,000 and a market...

AB Builders, Inc. has 12-year bonds outstanding with a face value of $1,000 and a market price of $974. The bonds pay interest annually and have a yield to maturity of 4.03 percent. What is the coupon rate? Select one: a. 3.75 percent b. 4.20 percent c. 4.25 percent d. 7.50 percent e. 8.40 percent
. AB Builders has 15-year bonds outstanding with à face value of $1,000 and a market...

. AB Builders has 15-year bonds outstanding with à face value of $1,000 and a market price of $974. The bonds pay interest annually and have a yield to maturity of 4.03 percent (1) What is the coupon per period? 价到期收益率rm 稣ㄧ摩: aa35 面值 (2) What is the coupon rate annually?'a

. AB Builders has 15-year bonds outstanding with à face value of $1,000 and a market...

. AB Builders has 15-year bonds outstanding with à face value of $1,000 and a market price of $974. The bonds pay interest annually and have a yield to maturity of 4.03 percent (1) What is the coupon per period? 价到期收益率rm 稣ㄧ摩: aa35 面值 (2) What is the coupon rate annually?'a
Ten years ago, Simply Splendid Corp. issued 40 year bonds with a $1,000 face value and...

Ten years ago, Simply Splendid Corp. issued 40 year bonds with a $1,000 face value and a 7 percent coupon rate, paid semiannually. Bond of this risk currently have a yield to maturity of 9 percent. How much would you expect to pay for one of these bonds today? Harley Group has outstanding $1,000 face value bonds that have a 6.5 percent coupon rate, paid semiannually, and mature in 18 years. They are currently selling for $935.15. What is their...
New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 14.5 years,...

New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 14.5 years, and have a 4.5 percent coupon. The current price is quoted at 97.6% of par. What is the yield to maturity?

Redesigned Computers has 6.5 percent coupon bonds outstanding with a maturity date of 8 years from...

Redesigned Computers has 6.5 percent coupon bonds outstanding with a maturity date of 8 years from now. The yield to maturity is 16 percent and the face value is $1,000. Interest is paid semiannually. What is the market price for these bonds?

Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...

Homework Answers

Add Answer to:
Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...

Post as a guest

Earn Coins

Lyme Home has 5,000 bonds outstanding with a face value of $1,000 each and a coupon...

1) New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 20...

Your firm has a bond issue with a face value of $710,000 outstanding. These bonds have...

AB Builders, Inc., has 25-year bonds outstanding with a par value of $2,000 and a quoted...

AB Builders, Inc. has 12-year bonds outstanding with a face value of $1,000 and a market...

. AB Builders has 15-year bonds outstanding with à face value of $1,000 and a market...

. AB Builders has 15-year bonds outstanding with à face value of $1,000 and a market...

Ten years ago, Simply Splendid Corp. issued 40 year bonds with a $1,000 face value and...

New Markets has $1,000 face value bonds outstanding that pay interest semiannually, mature in 14.5 years,...

Redesigned Computers has 6.5 percent coupon bonds outstanding with a maturity date of 8 years from...

Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...

Homework Answers

Add Answer to: Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...

Post as a guest

Earn Coins

Add Answer to:
Rappaport Industries has 5,500 perpetual bonds outstanding with a face value of $2,000 each. The bonds...