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Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt 8.84-1% %

Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt 8.84-1% %

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 9P: Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value...
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Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? Note: Round your answer to 2 decimal places. Cost of debt Explanation Solve {$970=$83.00×[1-1/(1+iD)^8/]+iD$1,000(1+iD)8} for iD Yields iD=0.088388, or 8.84%. \table[[A,B,C,],[1,Maturity,8,],[2,Price,97%,$29,100,000.00

Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? ed Note: Round your answer to 2 decimal places. Cost of debt 8.84+1-1% % Explanation Solve {5970- Yields ip $970 = $83.00 X (1+ip) iD + $1,000 (1+ip) for = 0.088388, or8.84%. 1 A Maturity 2 Price 3 FV 4 Coupon 5 ID .D B C 8 97% $ 29,100,000.00 $ 3,000,000.00 8.30% 8.84% $ 2,490,000.00 =RATE (B1, C4,-C2, B3)
Transcribed Image Text:Oberon, Incorporated has a $30 million (face value) 8-year bond issue selling for 97 percent of par that pays an annual coupon of 8.30 percent. What would be Oberon's before-tax component cost of debt? ed Note: Round your answer to 2 decimal places. Cost of debt 8.84+1-1% % Explanation Solve {5970- Yields ip $970 = $83.00 X (1+ip) iD + $1,000 (1+ip) for = 0.088388, or8.84%. 1 A Maturity 2 Price 3 FV 4 Coupon 5 ID .D B C 8 97% $ 29,100,000.00 $ 3,000,000.00 8.30% 8.84% $ 2,490,000.00 =RATE (B1, C4,-C2, B3)
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