What is holmes after-tax cost of debt

Assignment Help Financial Management

Reference no: EM131354499

After-tax Cost of Debt

The Holmes Company's currently outstanding bonds have a 8% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.

Reference no: EM131354499

Questions Cloud

What is your estimate of callahan cost of common equity : The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $26.25 per share; its last dividend was $1.80; and it will pay a $1.89 dividend at the ..

What will that do to our sourcing costs : Assume the exchange rate is such that a US dollar is currently worth A$1.15 (A$ is Australian dollars). If a company is sourcing materials from Australia and is contracted to pay A$27.5 million next year, what is that equivalent in US dollars? What w..

Well-diversified portfolio of high-quality-large-cap stocks : Nick Fitzgerald holds a well-diversified portfolio of high-quality, large-cap stocks. The current value of Fitzgeralds portfolio is $735,000, but he is concerned that the market is heading for a big fall (perhaps as much as 20%) over the next three t..

What is holmes after-tax cost of debt : The Holmes Company's currently outstanding bonds have a 8% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax..

What is the risk neutral probability of an up movement : A binomial tree with three-month time steps is used to value a currency option. The domestic and foreign risk-free rates are 2% and 4% respectively. The volatility of the exchange rate is 20%. What is the risk neutral probability of an up movement? W..

Issue perpetual preferred stock : Torch Industries can issue perpetual preferred stock at a price of $67.50 a share. The stock would pay a constant annual dividend of $6.00 a share. What is the company's cost of preferred stock, rp?

Valuation of constant growth stock : A stock is expected to pay a dividend of $1.75 at the end of the year (i.e., D1 = $1.75), and it should continue to grow at a constant rate of 10% a year. If its required return is 15%, what is the stock's expected price 4 years from today? Round you..

Use for debt when calculating cost of capital : Liu Industrial Machines issued 152,000 zero coupon bonds five years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.2 percent. Interest rates have recently increased, and the bonds now have a yield to maturity of 8.3 ..

User Account

All Pages