Calculate the annual amortization of the flotation cost

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Reference no: EM131317576

The floatation cost, the initial maturity, and the number of years remaining to maturity are shown in the following table for a number of bonds. The firm is in the 40 percent tax bracket.

Bond	Floatation Cost	Initial Maturity of Bond	Years Remaining to Maturity
A	$250,000	30 years	22 years
B	500,000	15	5
C	125,000	20	10
D	750,000	10	1
E	650,000	15	6

a. Calculate the annual amortization of the flotation cost for each bond.

b. Determine the tax savings, if any, expected to result from the unamortized floatation cost if the bond were called today.

Reference no: EM131317576

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