Pre-tax cost of debt capital, Finance Basics

Current cost of a bond: You know that the after-tax cost of debt capital for Bubbles Champagne is 7 percent. If the firm has only one issue of five-year maturity bonds outstanding, what is the current price of the bonds if the coupon rate on those bonds is 10 percent? Assume the bonds make semiannual coupon payments and the marginal tax rate is 30 percent.





(Omit the percent sign in your answer. Carry out all calculations to four decimal places and round your final answer to two decimal places, for example 7.80%.)

1. Pre-tax cost of debt capital = %.






(Omit the dollar sign in your answer. Carry out all calculations to four decimal places and round your final answer to nearest whole dollar.)

2. Current price of the bonds = $ .
Posted Date: 6/25/2012 10:07:51 PM | Location : United States







Related Discussions:- Pre-tax cost of debt capital, Assignment Help, Ask Question on Pre-tax cost of debt capital, Get Answer, Expert's Help, Pre-tax cost of debt capital Discussions

Write discussion on Pre-tax cost of debt capital
Your posts are moderated
Related Questions
Credit Standards A firm may follow a stringent or a lenient credit policy. The firm subsequent of a lenient credit policy tends to sell on credit to customers on extremely lib

Existence of Quantity Discounts Recurrently, the firm is capable to take benefits of quantity discounts.  Since these discounts affect the price per unit, they influence also

Problem: Cash Flow Analysis For the attached Gantt chart, the following information is available: Invoices are sent at the end of each month. Mark up is 20% on each invoi

Cash and Bonus Issue - Dividend For a firm to pay cash dividends, it should contain adequate liquid funds.Though, under conditions of liquidity and financial constraints, a fi

The construction of a highway is broken into 14 activities as shown in the following table. Draw a bar chart of this construction project. Activity ID Desc

Allocation of financial resources to the different department can be done based on the past experience of the expenses and other available relevant information. Looking at the requ

Discuss capital budgeting techniques including : the Payback Rule, IRR, NPV, and the Profitability Index. Be sure to discuss the advantages and disadvantages of each one.  Di

what is cash budgeting and what is it used for

1. A stock pays no dividend and is expected to be sold for $50 after 4 years. If the investor's RRR is 12%, at what price is he/she willing to buy it? 2. ABC company has its ROE

MM Dividend Irrelevance Theory Such was advanced via Modigliani and Miller in 1961.  The theory asserts to a firm's dividend policy has no effect on cost of capital and on its