Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Avicorp has a $14.4 million debt issue outstanding, with a 5.9% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 96% of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. The cost of debt is % per year. (Round to four decimal places.) b. If Avicorp faces a 40% tax rate, the after-tax cost of debt is %. (Round to four decimal places.)arrow_forwardUse the following data to calculate the Cost of Debt for the bond issues of Martin Corporation (one perecentage that represents the after tax cost for all the debt). Tax Rate = Face Value Current Price Coupon Rate Coupon payments per year Years remaining until maturity 20% Bond #1 $ 200,000,000 106.50 6.20% 2 12 Bond #2 $ 180,000,000 99.20 5.30% 2 15arrow_forwardThe coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 12%. The corporate tax rate is 33 %. What would be the approximate after-tax cost of debt for a new issue of bonds? Note: Round your answer to 2 decimal places.arrow_forward
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- Dogarrow_forwarddebt information -$1,000,000,000 in outstanding debt (face value) -current coupon rate = 9% (semiannual coupons) -current quote = 110 -15 years maturity -tax rate 40% a) what is the cost of debt? b) what is the after tax cost of debt?arrow_forwardViserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 16 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 4 percent annually. a. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 25 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) а. Pretax cost of debt % b. Aftertax cost of debt %arrow_forward
- Please answer ASAParrow_forwardAfter-Tax Cost of Debt LL Incorporated's currently outstanding 10% coupon bonds have a yield to maturity of 7.8%. 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_forwardGM currently has one debt issue that matures in 30 years, pays a semiannual coupon of 5%, costs $ 960, and has a $1000 par. Calculate the pre-tax cost of debt assuming flotation costs of 2%. Please report your answer in percent terms rounded to two decimal places.arrow_forward
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