Question

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by (1-T) Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 10.20 % for a period of eight years. Its marginal federal-plus-state tax rate is 25 %. OCP's after-tax cost of debt is (rounded to two decimal places). 8.80% At the present time, Omni Consumer Products d OP) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,181.96 10.20% carry a coupon rate of 13 % , and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25 %. If OCP wants ew debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two halplace.) 6.50% decimal places)? (Note: Round your YTM rate to 7.65% 9.67% O 7.25 % O B.06 % O9.27%

Answer 1

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BOND- Microsoft Excel (Product Activation Failed) Formulas File Home Insert Page Layout Data Review View Add-Ins Z AutoSum- Cut A A Wrap Text Calibri 11 General Copy Fill Sort & Find & Filter Select Merge & Center Insert Delete Format Paste в IUT 000 Conditional Format Cell $ % Format Painter Clear Formatting as Table Styles Alignment Clipboard Font Number Styles Cells Editing fox GZ305 Formula Bar GR GS GT GU GW GX GY GZ НА НВ НС HD 294 295 1 MULTIPLY BY (1-T) 296 297 10.20%*(1-0.25)= 298 2 AFTER TAX COST OF DEBT = 7.65% 299 300 3 YTM CALCULATION 301 302 PAR VALUE 1000 303 13% COUPON RATE COUPON (S) 304 130 YEARS 305 20 PRICE 306 1181.96 307 YTM = 10.75% =RATE(GV305,-GV304,GV306,-GV302)] 308 309 8.06% [YTM*(1-T)] 310 AFTER TAX COST OF DEBT = [10.75%*(1-0.25)] 311 312 BANKING S6 NOTE S1S3 S10 EUAC AW LIFE WARRANT refund E S4 S5 | ш YIELD SPOT Sheet2 BIDDING, UNDERWRITING 4 AFN CLEAN PRICE LP, IP, MRP, INFLATION Rea 130% erences W 04:50 1ENG 22-11-2019