Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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P&G has a 15-year, semiannual coupon bond with $1,000 par value. The coupon rate is 4% and the bond is selling for 80% of par value. If P&G wants to raise capital now by issuing debt, what is the before-tax of debt (in %) for P&G?
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- LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 5.7%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt? Round your answer to two decimal places.arrow_forwardThe outstanding debt of Berstin Corp. has ten years to maturity, a current yield of 6%, and a price of $80. What is the pretax cost of debt if the tax rate is 30%. Note: The current yield of a bond is its annual coupon divided by its price. A. 4.65% B. 6% OC. 6.2% OD. 7.75%arrow_forwardThe Holmes Company's currently outstanding bonds have a 10% coupon and a 13% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places.arrow_forward
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- Suppose ABE Co. issued a 20-year, 8 percent coupon rate bond three years ago. The bond is currently selling for $715.21. The bond has $1,000 face value and pays interests annually. If ABE’s tax rate is 30 percent, what is the firm’s after-tax cost of debt?arrow_forwardTo help finance a major expansion, a company sold a noncallable bond several years ago that now has 14 years to maturity. This bond has a 14.00% annual coupon, paid semiannually, sells at a price of $1,400, and has a par value of $1,000. If the firm's tax rate is 21%, what is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations. 8.94% 7.06% 3.53%arrow_forwardA firm raises capital by selling $18,000 worth of debt with flotation costs equal to 2% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 9%, what is the bond's YTM?arrow_forward
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