A bond has a $15million face value and a coupon rate of 9 percent. It has floatation costs of 5 percent of the face value. The bond matures in 10 years. The firm’s average tax rate is 30 percent and its marginal tax rate is 21 percent. Compute the after-tax cost of debt.
A bond has a $15million face value and a coupon rate of 9 percent. It has floatation costs of 5 percent of the face value. The bond matures in 10 years. The firm’s average tax rate is 30 percent and its marginal tax rate is 21 percent. Compute the after-tax cost of debt.
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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A bond has a $15million face value and a coupon rate of 9 percent. It has floatation costs of 5 percent of the face value. The bond matures in 10 years. The firm’s average tax rate is 30 percent and its marginal tax rate is 21 percent. Compute the after-tax cost of debt.
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