In order to calculate a WACC, you first must know the firm's cost of debt and equity. For debt, a firm can issue new bonds with a 4.05% coupon rate and a maturity of 25 years. Interest is paid semi-annually. The market price of the new issue would be $1,146.01 less a 4% of par flotation cost. The face value of the bond, payable at maturity, is $1,000. What is the before-tax cost of debt for this firm (please respond with to the basis point, but without the % sign - meaning if you calculate 3.7569456%, then enter 3.76.)?
In order to calculate a WACC, you first must know the firm's cost of debt and equity. For debt, a firm can issue new bonds with a 4.05% coupon rate and a maturity of 25 years. Interest is paid semi-annually. The market price of the new issue would be $1,146.01 less a 4% of par flotation cost. The face value of the bond, payable at maturity, is $1,000. What is the before-tax cost of debt for this firm (please respond with to the basis point, but without the % sign - meaning if you calculate 3.7569456%, then enter 3.76.)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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