For which capital component must you make a tax adjustment when calculating a firm's weighted average cost of capital (WACC)?○ DebtO Preferred stock○ EquityOmni Consumer Products Company (OCP) can borrow funds at an interest rate of 7.30% for a period of seven years. Its marginal federal-plus-statetax rate is 25%. OCP's after-tax cost of debt is(rounded to two decimal places).At the present time, Omni Consumer Products Company (OCP) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. Thesebonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs afederal-plus-state tax rate of 25%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to twodecimal places)? (Note: Round your YTM rate to two decimal place.)○ 9.17%O 6.88%8.79%O 7.64%

The weighted average cost of capital (WACC) is the sum of the market value weighted cost of the…

Answered: For which capital component must you…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter10: Forecasting Financial Statement

Section: Chapter Questions

Problem 8QE

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For which capital component must you make a tax adjustment when calculating a firm’s weighted average cost of capital (WACC)? Equity Preferred stock Debt Water and Power Company (WPC) can borrow funds at an interest rate of 7.30% for a period of four years. Its marginal federal-plus-state tax rate is 25%. WPC’s after-tax cost of debt is 5.48% (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,092.79 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 8.57% 7.14% 5.71% 8.21%
For which capital component must you make a tax adjustment when calculating a firm’s weighted average cost of capital (WACC)? Equity Debt Preferred stock Water and Power Company (WPC) can borrow funds at an interest rate of 7.30% for a period of five years. Its marginal federal-plus-state tax rate is 25%. WPC’s after-tax cost of debt is (7.30, 5.21, 6.03, 5.48) (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 9.17% 8.79% 7.64% 6.11%
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An overview of a firm's cost of debt For which capital component must you make a tax adjustment when calculating a firm’s weighted average cost of capital (WACC)? Pick the correct choice. A- Preferred stock B- Equity C- Debt Three Waters Company (TWC) can borrow funds at an interest rate of 12.50% for a period of five years. Its marginal federal-plus-state tax rate is 45%. TWC’s after-tax cost of debt is_________% (rounded to two decimal places). At the present time, Three Waters Company (TWC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If TWC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? Pick the correct choice. 5.60% 5.04%…
1. An overview of a firm's cost of debt To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Three Waters Company (TWC) can borrow funds at an interest rate of 9.70% for a period of six years. Its marginal federal-plus-state tax rate is 25%. TWC's after-tax cost of debt is (rounded to two decimal places). At the present time, Three Waters Company (TWC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,329.55 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal- plus-state tax rate of 25%. If TWC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 5.48% 4.87% 7.00% 6.09%
The (AFTER-TAX COST OF DEBT / BEFORE-TAX COST OF DEBT) is the interest rate that a firm pays on any new debt financing. Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 9.70% for a period of eight years. Its marginal federal-plus-state tax rate is 30%. OCP’s after-tax cost of debt is (7.81 / 6.79 / 9.70 / 6.45) (rounded to two decimal places). At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,229.24 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 30%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? _____
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Suppose that TapDance, Inc.’s capital structure features 75 percent equity, 25 percent debt, and that its before-tax cost of debt is 9 percent, while its cost of equity is 14 percent. The appropriate weighted average tax rate is 21 percent. What will be TapDance’s WACC? (Round your answer to 2 decimal places.)
Hello. I need help with the following question please. 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 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 45%. OCP’s after-tax cost of debt is 5.34% (rounded to two decimal places). At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 3.83% 5.75% 4.79% 4.31%

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