Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and a yield to maturity of 5.4%. Simple Corp.'s average tax rate is 18% and its marginal tax rate is 33%. Part 1 What is the (pre-tax) cost of debt? 3+ decimals Submit Part 2 What is the after-tax cost of debt? 4+ decimals

Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and a yield to maturity of 5.4%. Simple Corp.'s average tax rate is 18% and its marginal tax rate is 33%. Part 1 What is the (pre-tax) cost of debt? 3+ decimals Submit Part 2 What is the after-tax cost of debt? 4+ decimals

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 17.00 percent semiannual coupon bonds are selling at a price of $1,483. Assuming that these bonds are the only debt outstanding for the firm. Problem 13.19 a1-a3(a1) What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, eg. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) YTM %
You are analyzing the after-tax cost of debt for a firm. You know that the firm's 12-year maturity, 11.00 percent semiannual coupon bonds are selling at a price of $1,229. Assuming that these bonds are the only debt outstanding for the firm. Problem 13.19 a1-a3(a1) Your answer is correct. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) YTM eTextbook and Media Problem 13.19 a1-a3(a2) Your answer is incorrect. 8 % After-tax cost of debt What is the after-tax cost of debt for this firm if it has a marginal tax rate of 34 percent? (Round final answer to 2 decimal places, e.g. 15.25%.) Attempts: 1 of 3 used %
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