Calculate the after tax cost of overlapping interest

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The principal, coupon interest rate, and interest overlap period are shown in the following table for a number of bonds.

Bond

Principal

Coupon
Interest Rate

Interest
Overlap Period

A

$ 15,000,000

6.5%

2 months

B

20,000,000

7.0

3

C

15,000,000

6.0

4

D

100,000,000

8.0

6

a. Calculate the dollar amount of interest that must be paid for each bond during the interest overlap period.

b. Calculate the after-tax cost of overlapping interest for each bond if the firm is in the 40 percent tax bracket.

Reference no: EM131317646

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