Company X pays interest to the amount of R1 500 a year on total liabilities of R10 000. It can also issue bonds with a YTM of 12%. What will the relevant before tax cost of debt be when calculating that WACC for the company? a. 18% b. 12% c. 15% d. 8%

Q: mni.5 Andalusian Limited (AL) can borrow funds at an interest rate of 12.50% for a period of five…

A: The cost of debt is the expense incurred by the company annually to employ the debt capital, it is…

Q: Diamond Company's cost of debt financing is 10%. Its tax rate is 35%. Diamond has $3,000,000 of…

A: The cost of debt is the interest expense to be paid on the debt. Since interest expenses is tax…

Q: A P1000 000.00 issue of 3%, 15-year bonds is sold at 95% The miscellaneous initial expense of the…

A: Par value = P1000,000 Percentage at which sold =95% Initial cost = P20,000 coupon rate =3% Yearly…

Q: 3. Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond…

A: Solution- (a) the pre-taxed cost of debt is its yield to maturity (YTM)  Assume that Face value or…

Q: Company XYZ Bank Loan Face Value Maturity (Yrs) 190,000 $ 7 Bond 350,000 10 Interest Expense Cost of…

A: We need to calculate market value of debt for the given information

Q: A company has interest expenses totaling = $722 MM, for which they pay 7%/annum to their lender.…

A: Corporate financing involves the methods and sources a company uses to fund its operations and…

Q: Coco Kitchen has a WACC of 14%. It has 19% of return on equity, and 60% of debt-to-asset ratio…

A: WACC is the average cost of capital which is calculated by multiplying the weight with cost of…

Q: Using the following variables, calculate an organization's cost of debt on a $500,000 bond. • R₁: 1%…

A: The cost of debt refers to the expense that the company incurs to employ the debt capital to fund…

Q: Atlantic Corp needs to issue Bonds to raise money with standard par value. Corporation is going to…

A: Given: Amount to be raised = $2,019,331,015 Interest rate = 5% Tax rate = 40%

Q: Tom Fong Music Inc., has an outstanding bond callable at $1,340. The total value of the bond is $100…

A: Bonds that can be called anytime before maturity are known as callable bonds. Yield to maturity is…

Q: he following information is available for three companies. Rope Company Chain Company Line Company…

A: Interest is a cost to the borrower. The lender charges interest from the borrower. The company pays…

Q: Sheridan Industries has 8 percent coupon bonds outstanding. These bonds have a market price of…

A: Compound = semiannually = 2 Coupon rate = 8 / 2 = 4% Price of bond = pv = $990.67 Time = nper = 6 *…

Q: On January 1, 20x1, SPEED Company purchased 12% bonds, having a face value of P800,000. The bonds…

A: Bond is an investment security which is issued by large organizations to raise the fund. The bond…

Q: A (general obligation) muni bond pays 7% interest. A Treasury bond pays 6.5% interest. Which bond…

A: When deciding between a municipal bond (muni bond) and a Treasury bond based on their interest…

Q: Frosty Corporation pays 11.6% interest on its outstanding bonds.  If its tax rate is 40%, what is…

A: When the corporation pays the interest on bonds, they are eligible to deduct this as an expense in…

Q: Justice Corporation has P5 million in outstanding 16 percent mortgage bonds. Additional bonds may be…

A: Current debt 5 million Interest @ 16% 0.8 million Let's put each of the conditions for the…

Q: efore and after-tax cost of debt For the following $1,000-par-value bond paying semi-annual interest…

A: The bonds are the long term sources of finance for the companies. Bond are paid periodic interest…

Q: USA Manufacturing issued 7.5 percent semiannual bonds 6 years ago. The bonds currently sell at…

A: The after-tax cost of debt is the YTM adjusted for tax.

Q: David Co has in issue 4% irredeemable debt quoted at $155 (ex- interest). The corporation tax rate…

A: Cost of Capital is the minimum rate of return at which the company makes an adequate investment to…

Q: Calculate the aftertax cost of debt under each of the following conditions. (Do not round…

A: A) Yield = 8.5% and Tax rate = 23% or 0.23B) Yield = 14.5% and Tax rate = 37% or 0.37C) Yield = 12%…

Q: Amar Corporation pays 11.6% interest on its outstanding bonds.  If its tax rate is 40%, what is its…

A: Solution:- When a company issue bonds to raise funds, it pays interest on it. This interest is…

Q: Ravi Ltd. issued 1,000, 10% Debentures of Rs. 100 each redeemable after 10 years. The tax rate is…

A: Cost of debt would be the effective rate at of interest which company will pay on the debentures…

Q: A company issues GHS 1,000,000 12% debentures of par value of GHS 100 each. The debentures  are…

A: There is an inverse relation between the interest rate and the prices. If the prices are higher then…

Q: Zeeb LLC has 12% perpetual debt of OMR 120,000. The tax rate is 50%. Calculate Kd? a. 10% b. 6%…

A: Interest rate = 12% Tax rate = 50% Value of debt = OMR 120,000

Q: The company has a P1,000 par value bond outstanding with 25 years to maturity. The bond carries an…

A: Annual interest payment = P88 Maturity value = P1,000 Tax rate = 0.30 Current price = P925 Maturity…

Q: Brown Office Supplies recently reported $4422 in Net Income. It had $9,000 of bonds outstanding that…

A: EBIT is the earning before interest and tax. It can be calculated by using equation below.

Q: Compute for the approximate after tax-cost of debt.

A: Part-1   The after-tax cost of debt is the interest paid on debt less any tax savings due to claim…

Q: A bond selling to yield 12.6% for the purchaser of the bond. The borrowing firm faces a tax rate of…

A: Given details are : Yield to bond holder = 12.6% Tax rate = 34% = 0.34 We need to compute the after…

Q: Company A has issued $2 million (notional principal) in five-year bonds with a floating (variable)…

A: Interest is the amount paid to the lender by the borrower as a fee for the money borrowed. Interest…

Q: A P10,000 debt in the form of bonds, bears 4% interest payable annually. Construct an amortization…

A: Amount Borrowed = $10,000 Periods = 10 x 12 = 120 Rate = 0.04 / 12 = 0.003 Payment = $99.35

Q: A Corporation believes that it can sell long term-bonds with an 8% coupon rate, although the…

A: Corporate bond kind of debt issued by profit-generating organizations. These bonds are risky, unlike…

Q: e-Midland, Inc. is issuing a ​$1,000 par value bond that pays 7.5 percent annual interest and…

A: After tax cost of bond is the yield to maturity of bond that is rate of return realized on the bond…

Q: Calculate the pre-tax cost of debt for a company that sold 10-year 8% bonds 3 years ago if they are…

A: Pre tax cost of debt has to be found. The debt is in the form of a bond. So, the yield to maturity,…

Q: The cost of debt for Salalah Mills is 15.25% (effective rate) and its tax rate is 30.05% then what…

A: After tax cost of debt refers to the percentage measure of cost incurred on the money borrowed after…

Q: Calculate the aftertax cost of debt under each of the following conditions. (Do not round…

A: After Tax Cost of Debt = Pretax Cost of Debt * (1 - tax rate)

Q: PB3. 13.2 Starmount Inc. sold bonds with a $50,000 face value, 12% interest, and 10-year term at…

A: Interest expense on bonds The interest expense is the amount paid by the issuers of the bond to the…

Q: Irredeemable bonds were issued at 103 but registration and other fees amounted to 5% of issue price.…

A: Issue  price = 103 Issue cost = 5% Net amount received = 103*(1-0.05) = 103*0.95 = 97.85 Par value =…

Q: The current yield on a municipal bons is 6%. What would the equivalent taxable yield of this bond…

A: Yield on municipal bond is tax free. But yield on corporate bond is taxable. Given: Yield on…

Q: Buchanan Corporation is refunding $11 million worth of 11% debt. The new bonds will be issued for…

A: Given the following data,Refund amount = $11,000,000Tax Rate = 40% or 0.40Call Premium rate = 10% or…

Q: Buchanan Corporation is refunding $14 million worth of 11% debt. The new bonds will be issued for…

A: To calculate the after-tax call premium, you would subtract any applicable taxes from the total…

Q: Buchanan Corporation is refunding $13 million worth of 11% debt. The new bonds will be issued for 9…

A: Debt - $13,000,000Call premium = 10%Tax rate = 31%

Q: arket valu

A: We need to compute the market value of debt for the given information.

Q: A company issues a P300,000, 10 percent, 20-year bond. The tax rate is 40  percent. What is the…

A: Semiannual interest payment = Face value of Bond x interest rate x no. of months/12 = P300,000 x 10%…

Q: Rockingham Motors issued a 30-year, 8 percent semiannual bond 3 years ago. The bond currently sells…

A: Option a: This option is correct.Step 1:We have to calculate the after-tax cost of debt.First of…

Q: What is the tax exempt equivalent yleld on a 9% bond yleld given a marginal tax rate of 23%?…

A: Formula: Tax exempt equivalent yield = Bond yield x ( 100 - Marginal Tax rate )

Q: 5 years aso, Bartun Industries issued 25-year nuncallable, semiannual bonds with a $1,000 fuce value…

A: A bond is a kind of debt security issued by the government and private companies to the public for…