Approximate after-tax cost of debt for a new issue of bonds

Assignment Help Financial Management
Reference no: EM13950295

The coupon rate on an issue of debt is 11%. The yield to maturity on this issue is 10%. The corporate tax rate is 37%. What would be the approximate after-tax cost of debt for a new issue of bonds? (Round your answer to 2 decimal places.)

4.95%

7.75%

6.30%

8.45%

Reference no: EM13950295

Questions Cloud

Many hospitals adopt a major terminology system : Many hospitals adopt a major terminology system such as ICD, yet there is a need for specialized classification system terminologies, why do you think we need specialized classification terminologies? Describe at least 2 examples for specialized clas..
Important historical factors related to origins of sociology : Describe at least two important historical factors related to the origins of sociology. Do you think that sociologists should try to reform society or only study society objectively? Give reasons why
Risk-free rate of return-expected return on market portfolio : King Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4% and the expected return on the market portfolio is 14%. Analysts expect the price of Sure Tool Company shares to be $22 a year from now. Th..
Explain the phenomenon of persistent poverty : Use one theoretical perspective to explain the phenomenon of persistent poverty: Structural-Functionalist or Conflict. Pick the one you think explains more about inequality and explain specifically why
Approximate after-tax cost of debt for a new issue of bonds : The coupon rate on an issue of debt is 11%. The yield to maturity on this issue is 10%. The corporate tax rate is 37%. What would be the approximate after-tax cost of debt for a new issue of bonds?
Should an established patient be allowed to just : Should an established patient be allowed to just "call-in" to the doctor's office and receive prescription refills without coming in for an office visit?What risks does this pose for the physician's office by 'just "calling in meds"?
Negligible kinetic and potential energy effects : Air at 1 atm  with  dry-bulb  and  wet-bulb temperatures of 82 and 688F, respectively, enters a duct with a mass flow rate of 10 lb/min and is cooled at essentially constant pressure to 628F. For steady-state operation and negligible kinetic and p..
The intrinsic value of the bond : A coupon bond that pays interest annually has a par value of $1,000, matures in seven years, and has a yield to maturity of 9.3%. The intrinsic value of the bond today will be how much if the coupon rate is 8.5%. (whole number and cents if necessary)
Quality control consists of testing and defect management : The current environment consists of Development (sized at about 30% of production), Disaster Recover /Operational Recovery servers, and Production servers. The business area consists of about 300 Wintel desktop and laptop computers. The VP of Tech..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Determine present value of interest tax shield

Primary Health Care is one of Australia’s leading listed healthcare companies. Primary is a service company to medical and allied health professionals. Primary’s marginal corporate tax rate is 30%. Assume that the marginal personal tax rate on income..

  What is the feature of a corporate bond

What is the feature of a corporate bond that protects the purchaser from moral hazard on the part of the borrower?

  Option price be without there being arbitrage opportunity

For a European call option on a currency, the exchange rate is $2.0000, the strike price is $1.900, the time to maturity is one year, the domestic (U.S. Dollar) risk-free rate is 5% per annum, and the foreign risk-free rate is 3% per annum. How low c..

  New sausage system with an installed cost

Dog Up! Franks is looking at a new sausage system with an installed cost of $455,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $65,000. If the ta..

  Suppose you bought bond with an annual coupon rate

Suppose you bought a bond with an annual coupon rate of 7.2 percent one year ago for $945. The bond sells for $990 today. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total nomin..

  Macrs method instead of straight-line depreciation method

The initial installed cost for a new piece of equipment is $10,000. After the equipment has been in use for 4 years, it is sold for $7,000. The company that originally owned the equipment employs a straight-line method for determining depreciation co..

  Fixed assets-company had operated at full capacity

Company XYZ had $410 million in sales last year, and it had $75 million of fixed assets that were being operated at 80% of capacity. How large could sales have been (in Millions) if the company had operated at full capacity?

  What is the projects net cash flow

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $1.4 million. The fixed asset falls into the three-year MACRS class. The tax rate is 35 percent and the required return i..

  What is the price today for delicious mills bond

7 years ago, Delicious Mills, Inc. issued 30-year to maturity bonds that had a 10.17 percent annual coupon rate, paid semiannually. The bonds had a $1,000 face value. Since then, interest rates in general have changed and the yield to maturity on the..

  Bond valuation-interest payment

An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 9% annual coupon. Bond L matures in 18 years, while Bond S matures in 1 year. Assume that only one more interest payment is to be made on Bond S at its maturit..

  Computer-based order entry system-required return

Your firm is contemplating the purchase of a new 540,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five year life. It will be worth 48,000 at the end of that time. Suppose your required return on..

  Lesser responsibility for maintaining ethical corporate

Does the financial manager have a greater responsibility or a lesser responsibility for maintaining ethical corporate governance? Why or why not? What is your approach to ethical corporate governance?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd