What is the after-tax cost of debt

Assignment Help Financial Management

Reference no: EM132004370

Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The tax rate is 40%.

If the flotation cost is 2% of the issue proceeds, then what is the after-tax cost of debt?

Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimal places.

Reference no: EM132004370

Questions Cloud

Determine interest rates on deposits and loans : Determine interest rates on deposits and loans. Calculate the banker control rent (profit) and delegation cost per borrower.

What is the value of the firms equity : Suppose the firm has no debt and pays out its net income as a dividend each year. What is the value of the? firm's equity?

What percentage of this loss will insurance company pay : How much insurance should they have carried to meet the co-insurance obligation? What percentage of this loss will the insurance company pay?

What is the present value of this project to the company : Assuming the company completes the project on schedule, what is the present value of this project to the company?

What is the after-tax cost of debt : If the flotation cost is 2% of the issue proceeds, then what is the after-tax cost of debt?

Strategy to capitalize on expected exchange rate movement : As part of a strategy to capitalize on the expected exchange rate movement, the bank could ___ euros and ___ dollars.

What is the irr of the project : Calculate the net present value of the above project for discount rates of 0, 50, and 100%.

What if you issue the zeroes : Assume the required return on your bond issue will be 8.3 percent, and you're evaluating two issue alternatives.

What are the tax consequenses from receiving these funds : Telsa Corporation received $400,000,000 from the state of Nevada to built a plant in that state. What are the Tax consequenses from receiving these funds

User Account

All Pages