What is after-tax cost of capital for debt financing

Assignment Help Financial Management

Reference no: EM131346426

Great Seneca Inc. sells $100 million worth of 22-year to maturity 13.44% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $989 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital for this debt financing? Round the answer to two decimal places in percentage form.

Reference no: EM131346426

Questions Cloud

Action entrenched management : Using a real world example to illustrate your point, describe at least one action entrenched management might take that would harm shareholders.

A firm is considering two different capital structures : A firm is considering two different capital structures. The first option is an all-equity firm with 40,000 shares of stock. The second option is 28,000 shares of stock plus some debt. Ignoring taxes, the break-even level of earnings before interest a..

Willing to pay for share of jones preferred stock today : Lunch Trucks, Inc. just paid a dividend of $2.00. Dividends are expected to grow at a rate of 3% per year from here on out. If the risk-free rate is 2%, the MRP is 8%, what is the most that you should be willing to pay for a share of this stock today..

Purchased the bond today and held it until maturity : Fresh Fruit, Inc. has a $1,000 par value bond that is currently selling for $1,005. It has an annual coupon rate of 9.34 percent, paid semiannually, and has 29-years remaining until maturity. What would the annual yield to maturity be on the bond if ..

What is after-tax cost of capital for debt financing : Great Seneca Inc. sells $100 million worth of 22-year to maturity 13.44% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $989 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital ..

Using present worth analysis of cash flows from project : A company is considering purchasing a new computerized management information system. During the first year of the project, company engineers must spend time to customize software for this project at a cost of $20,000. There will also be some additio..

Interpretation based on coefficient of determination : A career counselor wishes to estimate, based on the following sample data, the mean increase in the annual salary of people (in thousands of dollars) per additional year of education pursued. Years, x 12 13 14 15 16 17 Salary, y 25 31 43 52 58 60 Whi..

Which is the coefficient of determination : A career counselor wishes to estimate, based on the following sample data, the mean increase in the annual salary of people (in thousands of dollars) per additional year of education pursued. Years, x 12 13 14 15 16 17 Salary, y 25 31 43 52 58 60 Usi..

Is the taxable income positive or negative : Compute the cash flow, tax flow, and after cash flow for the following real estate investment property. ompute Tax Flow (Taxable Income or Less on this property). Is the taxable Income Positive or Negative?

User Account

All Pages