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Airborne Airlines Inc. has a $1,000 par value bond outstanding with 20 years to maturity. The bond carries an annual interest payment of $106 and is currently selling for $860. Airborne is in a 40 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar. a. Compute the yield to maturity on the old issue and use this as the yield for the new issue. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Yield on new issue % b. Make the appropriate tax adjustment to determine the aftertax cost of debt. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Aftertax cost of debt %
AndyCoi Inc has the following balance sheet and an equity of market to book ratio of 1.5 assuming the market value of debt equals its book value, what weights should it use for WACC calculation?
Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 765,000 shares of stock outstanding. Under Plan II, there would be 515,000 shares of stock outstan..
What is the monthly principal and interest payment on a $170,000 15 year mortgage at 5.5% interest? Mary and Carlos want to buy a $400,000 house. They have $50,000 for a down payment. Their lender is offering them a 30 year mortgage at 6.2%. What is ..
Stu can purchase a one-bedroom house near his college today for $110,000, including the cost of some minor repairs. He expects to be able to resell it in four years for $150,000 if he just puts a little effort into cleaning up the property. At a disc..
Pine Tree Farms Corporation (PTFC) has a target capital structure of 30% debt, 10% preferred stock, and 60% common equity. Currently PTFC has a capital structure of 75% debt, 10% preferred stock, and 15% common stock.
Find the finance charges on an 8 percent, 18-month, single-payment loan when interest is computed using the simple interest method. Find the finance charges on the same loan when interest is computed using the discount method. Determine the APR in ea..
BDJ Co. wants to issue new 25-year bonds for some much-needed expansion projects. The company currently has 7.8 percent coupon bonds on the market that sell for $1,125, make semiannual payments, and mature in 25 years. What coupon rate should the com..
May Industries has a bond outstanding that sells for $780. The bond has a coupon rate of 7.20 percent and 11 years until maturity. What is the yield to maturity of the bond?
Breakeven cash inflows The One Ring Company, a leading producer of fine cast silver jewelry, is considering the purchase of new casting equipment that will allow it to expand its product line. If One Ring requires a 9% return on its investment, what..
Find the duration of a bond with settlement date June 1, 2012, and maturity date November 25, 2021. The coupon rate of the bond is 8%, and the bond pays coupons semiannually. The bond is selling at a yield to maturity of 9%. Macaulay duration Modifie..
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.82 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. What is the projec..
Junkman's Warehouse and Storage Company has an unusual bond outstanding with exactly 10 years remaining until maturity and a face value of $1,000. The bond is unusual because the annual coupon payments remaining are $50 for the next five years and $1..
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