What is the firm after-tax component cost of debt

Assignment Help Financial Management

Reference no: EM131318790

Bond Yield and After-Tax Cost of Debt A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 20 years sells at a price of $638.55. The company's federal-plus-state tax rate is 40%. What is the firm's after-tax component cost of debt for purposes of calculating the WACC? Round your answer to two decimal places. (Hint: Base your answer on the nominal rate.)

Reference no: EM131318790

Questions Cloud

What is the ytm and the current yield : Rolling Company bonds have a coupon rate of 4.00 percent, 14 years to maturity, and a current price of $1,086. What is the YTM? The current yield?

Valuing bonds and treasury bonds : Treasury Bonds- Is it true that a U.S. Treasury security is risk-free? Valuing Bonds- Even though most corporate bonds in the United States make coupon semiannually, bonds issued elsewhere often have annual coupon payments.

Issues zero coupon bonds on the market : Atlantis Fisheries issues zero coupon bonds on the market at a price of $438 per bond. These are callable in 6 years at a call price of $630. Using semiannual compounding, what is the yield to call for these bonds? (Do not round intermediate calculat..

Violation of the exchanges position limit : The following are four customer accounts. Which accountd are in violation of the exchanges position limit which is equal to 75,000 contracts for XYZ? Please explain

What is the firm after-tax component cost of debt : Bond Yield and After-Tax Cost of Debt A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 20 years sells at a price of $638.55. The company's federal-plus-state tax rate is 40%. What is the firm's after-tax component..

Calculate the next expected dividend per share : Cost of Equity Radon Homes's current EPS is $6.16. It was $4.07 5 years ago. The company pays out 55% of its earnings as dividends, and the stock sells for $34. Calculate the historical growth rate in earnings. Calculate the next expected dividend pe..

What was most recent dividend per share paid on stock : Teder Corporation stock currently sells for $40 per share. The market requires a 14 percent return on the firm's stock. If the company maintains a constant 7 percent growth rate in dividends, what was the most recent dividend per share paid on the st..

Bill plans to open self-serve grooming center in storefront : Bill plans to open a self-serve grooming center in a storefront. The grooming equipment will cost $480,000, to be paid immediately. Bill expects aftertax cash inflows of $103,000 annually for eight years, after which he plans to scrap the equipment a..

What is the bond price : Mur Corps bonds mature in 8 years, with a par value of $1,000, and an annual coupon rate of 6.5% The market requires an interest rate of 8.2% on these bonds. What is the bond's price?

User Account

All Pages