Rappaport Industries has 6,250 perpetual bonds outstanding with a face value of $2,000 each. The bonds have a coupon rate of 6.0 percent and a yield to maturity of 6.3 percent. The tax rate is 35 percent. What is the present value of the interest tax shield?

Q: JP Smith, Inc has an outstanding bond issue, which has eight years remaining to maturity and a…

A: Par value = $ 1000 Coupon rate = 4.250% Semi annual coupon amount = 1000*0.0425*1/2 = $ 21.25 Years…

Q: How low does the market interest rate need to drop to justify refunding with a new bond issue?

A: Step 1 NPV is employed in capital budgeting and investment going to analyze the gain of a projected…

Q: Suppose that LilyMac Photography expects EBIT to be approximately $210,000 per year for the…

A: Given that Lily Mac photography  has 1000, 10 year ,9% annual coupon bond outstanding.Multiplying…

Q: Oberon, Inc. has a $20 million (face value) 10-year bond issue selling for 97 percent of par that…

A: The before tax cost of debt is calculated as bond YTM which can be estimated from the RATE function…

Q: C. XY Ltd has bonds outstanding with 7 years left before maturity. The bonds are currently selling…

A: Yield to maturity refers to the internal rate of return which is earned by the investor who makes…

Q: The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 10%. The corporate…

A: Yield to Maturity is the total return anticipated on a bond if it is held until it matures. It takes…

Q: The Mills Company had issued a bond 10%, 10 year bonds with a face value of P1,000 each and paying a…

A: Bonds are the financial instruments that are issued by corporations for acquiring capital and funds…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: After tax cost of debt of each bond can be computed by calculating effective interest of the each…

Q: ABC company will contract a new loan in the sum of $2,000,000 that is secured by machinery and the…

A: WACC stands for Weighted Average Cost of Capital, which is the average cost of all the capital a…

Q: Bonds issued last year by Gowen Inc. carried a coupon rate of 7%. Bonds issued today by Gowen Inc.…

A: Cost of debt is the effective rate that a company pays on its debt. Here the debt is in the form of…

Q: Your firm has a bond issue with a face value of $500,000 outstanding. These bonds have a coupon rate…

A: The use of debt comes with an advantage. The advantage is that coupon payments or interest payments…

Q: corporate bond has a face value of $1,000 and a coupon rate of 8.25%, paid annually. The bond…

A: The annual coupon payment on the bond is calculated below

Q: Lugget Corp. has one bond issue outstanding with an annual coupon of 4.4%, a face value of $1,000…

A: Pre tax cost of debt refers to the Yield to Maturity (YTM) of the bond. This can be calculated by…

Q: The Holmes Company's currently outstanding bonds have a 9% coupon and an 11% yield to maturity.…

A: The effective interest rate that a business pays on its debt commitments is known as the cost of…

Q: Oberon, Inc. has a $25 million (face value) 10-year bond issue selling for 96 percent of par that…

A: The before tax cost of debt is calculated as bond YTM which can be estimated from the RATE function…

Q: DQ, Inc. expects EBIT to be approximately $11.4 million per year for the foreseeable future, and it…

A: EBIT - $11.40 million Bond :no of bonds- 20,000 Interest rate -10% Face value - $1000 Annual…

Q: The Holmes Company's currently outstanding bonds have a 7% coupon and a 13% yield to maturity.…

A: After tax cost of debt = Before tax cost of debt * (1-tax rate)

Q: Gerald Morris Corporation (GM) plans to issue bonds to raise $95 million. GM's investment banker…

A: First, we need to calculate the total amount that GM needs to raise, including the flotation costs.…

Q: Home Depot has debt outstanding with a face value of $30 billion. The coupon rate on these bonds is…

A: Face value: $30 billionCoupon rate: 6.2%YTM: 7.8%Tax rate: 26%

Q: The June Bug has a $270,000 bond issue outstanding that matures in 22 years. These bonds have a 7.6…

A: We Can Determine the Interest Tax Shield Using The Following Equation:Interest tax shield = Face…

Q: The company wants to sell a Php 69,000,000 worth of bonds with a maturity of 25 years. The coupon…

A: Bonds: Bonds are the liabilities for the company that is issued to generate the funds required for…

Q: Bayside Inc. sells $5,000,000 of five-year, 10% bonds at the start of the year.  The bonds pay…

A: Value of Bonds=$5,000,000  Coupon rate=10% Years to maturity=5 years Effective yield=9% Bond…

Q: XYZ Company has bonds outstanding with 7 years left before maturity. The bonds are currently selling…

A: The effective interest rate that a corporation pays on its obligations, such as bonds and loans, is…

Q: Universal Manufactoring plans to issue long-term bonds to raise funds to support future expansion.…

A: The coupon rate on a bond is the annual interest rate that the issuer promises to pay to the…

Q: The H-mart’s currently outstanding  6 percent annual coupon bonds have maturity of 20 years with par…

A: Annual coupon rate is 6% Maturity is 20 years Par value is $1,000 Current price of bond is $850 Tax…

Q: The Besson Co. is going to issue a twenty-year 8% (annual) coupon bond making semi-annual coupon…

A: Yield to maturity (YTM) is the rate of return that the bond provides to its holders if its held till…

Q: Sony bonds were issued 8 years ago with a coupon rate of 9%. The bond has 2 years left to maturity…

A: A bond is a financial instrument that is issued by a corporation in the financial markets. Bonds are…

Q: Beckham Corporation has semiannual bonds outstanding with nine years to maturity that are currently…

A: A bond is a type of debt security. Borrowers, such as businesses or governments, issue bonds to…

Q: Joliet Company is planning to issue $1,000 par value bonds that have a coupon rate of 9.6%.  The…

A: using financial calculator, N= no. of periods  N= 15*2 = 30 PMT = coupon payment PMT = 1000*9.6%/2 =…

Q: Charlie Corporation is a chemical company. The company issued an outstanding bond with a P100,000…

A: Par value of bond (FV) = P100,000 Coupon rate = 8% Quarterly coupon amount (C) = 100,000*0.08/4 =…

Q: If the company’s tax rate is 28%, what component cost of debt should be used in the WACC…

A: Information Provided: Years to maturity = 15 years Coupon rate = 5% semi-annually Price = $985 Par…

Q: Sabine Co has outstanding bonds with 10 years remaining until maturity, a coupon rate of 7%,…

A: Data given: Coupon rate=7% (semi-annual) N=10 years Par value=$1000 Market price=$1000 * 96.5%=$965…

Q: ojo Mining has a bond outstanding that sells for $2,084 and matures in 22 years. The bond pays…

A: Calculation of yield to maturity of bond using Excel:

Q: Lululemon needs to raise $115 million and wants to issue 20-year zero-coupon bonds for this purpose.…

A: Amount need to be raise = $115 million Time = t = 20 years Required rate of return = r = 5.4% Face…

Q: Suppose that LilyMac Photography expects EBIT to be approximately $ 210,000 per year for the…

A: Given that Lily Mac photography  has the following :Total number of bonds = 1000Face value=…

Q: Avicorp has a $10.9 million debt issue outstanding, with a 6.1% coupon rate. The debt has…

A: Debt refers to borrowings made by a company. A company has to pay periodic interest or coupon…

Q: If the corporate tax rate is 34%, what is the after-tax cost of the company's debt? (Do not round…

A: The after-tax cost of debt measures the actual interest rate that a firm pays on its debt after…

Q: Harbor Inc. wants to raise $80 million by issuing 10-year zero-coupon bonds at an annual interest…

A: Bonds are instruments of debt. They are used to raise capital and have a fixed cost of interest…

Q: What is the company's after-tax cost of debt?

A: Face value = 1000Price = 1179.65 N = 10 years Annual coupon rate = 4%/100 = 0.04 in decimalCoupon =…

Q: The outstanding debt of Berstin Corp. has ten years to maturity, a current yield of 6%, and a price…

A: Bonds refer to debt securities issued by a company or a government entity to raise capital. Bonds…

Q: Melekom Berhad has 16 years to maturity bond with a RM1,000.00 par value. The bond pays RM7S.00 a…

A: Note: Here it is assumed that the Interest amount is RM75 per year and the selling price is RM550.…