Calculate the approximate yield to maturity of the bonds, Cost Accounting

Netflix Inc wants to issue discount bonds with a market value equal to 45% of their face value. The income tax rate of Netflix is 30%. The bonds will carry 3.5% coupon, paying interest semi annually, and they will mature after 10 years.

(A) Calculate the approximate yield-to-maturity of the bonds, and then the after-tax cost of debt for Netflix.

Answer: 8.69%

(B) Using the concept of original issue discount, write an equation that would give the after-tax cost of debt for Netflix. Solve this equation by using Maple, WolframAlpha, or Excel.

Answer: 9.675%

Posted Date: 3/8/2013 4:55:15 AM | Location : United States







Related Discussions:- Calculate the approximate yield to maturity of the bonds, Assignment Help, Ask Question on Calculate the approximate yield to maturity of the bonds, Get Answer, Expert's Help, Calculate the approximate yield to maturity of the bonds Discussions

Write discussion on Calculate the approximate yield to maturity of the bonds
Your posts are moderated
Related Questions
what would your answer be to the following problem, please show detailed calculations: The XYZ Company manufacturers Part 123 for use in its production line. The manufacturering co


Prime Essentials Limited is a small private corporation. The owner plans to approach the bank for an additional loan or a line of credit to facilitate expansion. The company bookke

(i) In terms of cashflow, which month will be the most costly for your project? (ii) If the 3rd and 4th months are more expensive by 25% each because the outsourced labour took

These balances for a company x Raw materials $40,000 Work in process $30,000 Finished goods $60,000 for the current year the company estimated that it would work 150.000 m

Rosco Company purchased 35,000 shares of common stock of Paxton Corporation as a long-term investment for $900,000. During the year, Paxton Corporation reported net income of $300,

The follow data relates ot year 20XX for Plano Manufacturing Company: Units produced - 2,000 Units sold - 1,800 Selling price - $200 / per unit Direct material costs - $80,000 Dire

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: selling price $140 units in begining in

Advertising expense $17,200 Wages expense-assemblers 36,840 Depreciation expense-machines 21,480 Utilities expense-factory 21,120 Wages expense-lathe operators 23,480 Repair expens

You are thinking of investing in one of two corporations, both in the same industry, the XYZ Corporation or the ABC Corporation. Selected data follows: Sales data for the year e