Determine the after-tax cost of debt

Assignment Help Financial Management
Reference no: EM131322840

Airborne Airlines Incorporated has 1000 par value Bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $88 and is currently selling for $950. Airborne is in a 40% tax bracket. The Firm wishes to know what the after-tax 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 year for the new issue.

B. make the appropriate tax adjustment to determine the after-tax cost of debt.

Reference no: EM131322840

Questions Cloud

How much does robert have to contribute to her pension fund : Using a financial calculator, how should we calculate the following questions. 1. What is the present value of $10,000 to be received each year for 20 years if the payments start immediately. Assume a discount rate of 5%. 2.Robert wants to withdraw $..
Calculate the analysis of the wet products of combustion : In the actual combustion of benzene in an engine the A/F ratio was 12/1.
Assignment-supply chain design and implementation : This assignment will help you develop an understanding about the life cycle of supply chains including the models that are aligned with it and the cost it bears. In addition, you will develop an awareness of the elements of the supply chain that s..
Explain how career aligns with your professional interests : Write a 700- to 1,050-word paper including the following: Summarize the article. Explain how this career aligns with your professional interests
Determine the after-tax cost of debt : Airborne Airlines Incorporated has 1000 par value Bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $88 and is currently selling for $950. Airborne is in a 40% tax bracket. compute the yield to maturity on the..
Independent variables involved in factorial design : How many independent variables are involved in a 3 x 3 factorial design? How many levels are there of each variable? How many experimental conditions are there? Draw the design.
Analyse the current state of international corporate : Critically analyse the current state of international corporate PC market to get a better sense for the environment to address the problem of Lenovo. Use the concept of Porter's Six Forces.
What is to be gained by looking closer at engineering : What contribution does engineering make that architecture can't make itself? What is to be gained by looking closer at engineering, according to Le Corbusier?
Describe reasons users are still frustrated with modern apps : Describe three (3) reasons users are still frustrated with modern applications.Suggest one (1) method for reducing the frustrations for each of the reasons you supplied in Question one (1).Describe methods for determining if user frustration is caus..

Reviews

Write a Review

Financial Management Questions & Answers

  What is current share price-company will maintain dividend

Estes Park Corp. pays a constant $8.60 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 11 percent, what is the current share pr..

  What are standard deviations of associated forecast errors

What are the standard deviations of the associated forecast errors? Also compute the lag-1 and lag-2 autocorrelations of the return series.

  The variable growth common stock valuation model

The variable growth common stock valuation model. finds the sum of the present value of dividends during the initial growth period and the present value of the price of the stock at the end of the initial growth period.

  What is the standard deviation of the two asset portfolio

An investor wants to form a two asset portfolio consisting of Treasury bills with a return of 2.5% and a risky portfolio with an expected return of 15.2% and a standard deviation of 16%. The investor wants the expected return of the two asset portfol..

  Use the protective list system to protect work of licensee

You must have a corporation or LLC business structure to be a “Brokerage” and hold a real estate broker license. Regulation and oversight of real estate activities in Minnesota is done by the Commissioner of Commerce. The State of Minnesota does not ..

  The law firms weighted average cost of capital

The law firm of Bushmaster, Cobra and Asp is considering investing in a complete small business computer system. The initial investment will be $50,000. The computer is in the 5-year MACRS category, and the firm's tax rate is 34%. Calculate the net p..

  Considering launching a new line of plug-in electric suvs

Ford Motor Company is considering launching a new line of Plug-in Electric SUVs. The heavy advertising expenses associated with the new SUV launch would generate operating losses of $35 million next year. Without the new SUV, Ford expects to earn pre..

  In 1930 the highest paid player in major league baseball

1 in 1930 the highest paid player in major league baseball was babe ruth of the new york yankees with an annual salary

  What happens if you compute the average deviation from mean

What happens if you compute the average deviation from the mean, rather than the average squared deviation from the mean?

  Consider the payments from argent to be pure profit

Baskin is a young entrepreneur who invented a new product with his best friend, Arthur. Arthur has since left the company, but still receives royalty payments of 34% of the profit from the product. In terms of present worth, how much would Baskin rec..

  What is the portfolio beta

An investor has put money in four stocks in the dollar amounts indicated and with betas specified. What is the portfolio beta?

  What is most you should pay for it today

Your broker offers to sell you some shares of Bahnsen & Co common stock that paid a dividend of $2 yesterday. You expect the dividend to grow at the rate of 5% per year for the next 3 years, and if you buy the stock, you plan to hold it for 3 years a..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd