What is the before-tax cost of capital for debt financing

Assignment Help Financial Management
Reference no: EM131020034

Black Hill Inc. sells $100 million worth of 18-year to maturity 7.58% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $972 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?

Reference no: EM131020034

Questions Cloud

Bonds make semi-annual payments and have par value : DMA Corporation has bonds on the market with 17.5 years to maturity, a YTM of 6.4 percent, and a current price of $1,037. The bonds make semi-annual payments and have a par value of $1,000. What must the coupon rate be on these bonds?
What is the firms cash flow to creditors : Evans Co. showed long-term debt of $1.7M in 2005, and the December 31, 2006 balance sheet showed long-term debt of $1.9M. The 2006 income statement showed an interest expense of $650,000. What is the firm's cash flow to creditors in 2006? Given the i..
Held diversified portfolio consisting : Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 2.28. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and to u..
What is the yield to maturity of this bond : Fred is going to buy a 19 year bond that pays a coupon rate of 11.56% per year and has a $1,000 par value. The bond is currently priced at $1,326.92. What is the yield to maturity of this bond? Assume annual coupon payments. Show work. Round answer t..
What is the before-tax cost of capital for debt financing : Black Hill Inc. sells $100 million worth of 18-year to maturity 7.58% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $972 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?
Assume semi-annual coupon payments : What is the yield to maturity of a 23 year bond that pays a coupon rate of 8.25% per year, has a $1000 par value and is currently priced at $1,298.05? Assume semi-annual coupon payments.
Consist entirely of current assets-net plant and equipment : The assets of Dallas & Assoc. consist entirely of current assets and net plant and equipment. The firm has total assets of $ 2,606,694 and net plant and equipment of $ 1,103,618. The company has notes payable of $ 140,331, long-term debt of $ 823,770..
What is the yield on a one year T-bill : An analyst evaluating securities has obtained the following information. The real rate of interest is 2.7% and is expected to remain constant for the next 5 years. The liquidity premium on relevant 5-year securities is 0.5% and the default risk premi..
What is the yield on this five year corporate bond : A 5-year Treasury bond has a 3.45% yield. A 10-year Treasury bond yields 6%, and a 10-year corporate bond yields 9.4%. The market expects that inflation will average 3.75% over the next 10 years (IP10 = 3.75%). What is the yield on this 5-year corpor..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the stock current price per share-recapitalization

Tapley Inc. currently has total capital equal to $5 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $1 million, and distributes 40% of its earnings as dividends.  What is the stock’s current price per share (..

  The yield to maturity of the bond

A bond has a coupon of 6%. It has a face value of $100. It pays interest semi-annually. The bond was issued on March 18th, 2013. The settlement date is March 21st, 2013. The maturity date is 3/23/2023. The first interest payment is June 18th, 2013. T..

  Level annual payments

A loan is to amortized by n level annual payments of X, where n≥6. You are given: i) The amount of interest in the first payment is $ 458.44. ii) The amount of interest in the third payment is $ 432.92. iii) The amount of interest in the fifth paymen..

  What EAR is Skip paying to buy his furniture

Skip Towne goes into Frank’s Friendly Furniture Sales and purchases a living room set and bedroom suite for $1,950 total. Skip has to make payments of $100 per month for 36 months. What EAR is Skip paying to buy his furniture?

  What is the projects net present value if the required rate

A project is expected to create operating cash flows of $33,000 a year for three years. The initial cost of the fixed assets is $68,000. These assets will be worthless at the end of the project. An additional $4,500 of net working capital will be req..

  Business and government relations

Discuss the main reasons why a business should or should not be involved in political discussions or take a political stand. Use terms found in Chapter 9 to demonstrate your understanding of the material.

  What was its interest expense

Molteni Motors Inc. recently reported $3.25 million of net income. Its EBIT was $7.75 million, and its tax rate was 35%. What was its interest expense? Round your answer to the nearest dollar. Enter your answer in dollars. For example, an answer of $..

  Firm is anticipated to have net income per share

Suppose a firm is anticipated to have a Net Income per Share of $25 next year and is expected to pay only 20% of (total) Net Income in Dividends. Also, the firm faces an unusually high cost of common stock of 22% and has an unusually low dividend gro..

  Unbiased expectations theory-maturity treasury securities

Unbiased Expectations Theory Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=4.45%, E(2r1) =5.45%, E(3r1) =5.95%..

  What is the minimum expected annual return for stock

In order to fund her retirement, Michele requires a portfolio with an expected return of 0.10 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..

  What is your profit at the current exchange rate

Suppose your company imports computer motherboards from Singapore. The exchange rate is S$1.2348/US$. You have just placed an order for 34,000 motherboards at a cost to you of 142.9 Singapore dollars each. You will pay for the shipment when it arrive..

  Dividends per share are expected to grow indefinitely

XYZ company dividends per share are expected to grow indefinitely by 3% a year. Next year's dividend is $4.50 and the required rate of return (i.e. equity holder's opportunity cost of capital) is 8%. Assuming this is the best information available re..

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