What would the aftertax cost of debt be

Assignment Help Financial Management

Reference no: EM131298162

The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 14 percent to help finance a new playground facility in Los Angeles. This year the cost of debt is 30 percent higher; that is, firms that paid 16 percent for debt last year will be paying 20.80 percent this year.

a. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of debt be, based on their cost last year and the 30 percent increase? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Aftertax cost of debt %

b. If the receipts of the foundation were found to be taxable by the IRS (at a rate of 20 percent because of involvement in political activities), what would the aftertax cost of debt be? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Aftertax cost of debt %

Hints

References

eBook & Resources

Reference no: EM131298162

Questions Cloud

Significant limitations in managing interest rate risk : Explain the following statements and is true statment? Duration tools have significant limitations in managing interest rate risk. Asset/Liability managers will prefer that assets be more convex than liabilities.

What is the expected market risk premium : Calculate the expected return of each stock. Assuming the capital asset pricing models holds and stock A's beta is greater than stock B's beta by .25, what is the expected market risk premium?

Federal income tax bracket : Calvin is an 85 year old single taxpayer who is in the 39.6% federal income tax bracket. As part of his estate planning strategy, he gifted General Electric Corporation bonds to his 30 year old grandson, Casey, who is single and in the 25% federal in..

Calculate expected return-standard deviation for two stocks : Calculating Returns and Standard Deviations. Based on the following information, calculate the expected return and standard deviation for the two stocks.

What would the aftertax cost of debt be : The Goodsmith Charitable Foundation, which is tax-exempt, issued debt last year at 14 percent to help finance a new playground facility in Los Angeles. If the Goodsmith Charitable Foundation borrowed money this year, what would the aftertax cost of ..

What is marginal cost per minute of making two more calls : Mary buys cell-phone services from a company that charges $30 per month. For that $30 she is allowed 600 minutes of free calls and then pays 25 cents per minute for any calls above 600 minutes. Mary has used 300 minutes this month so far. What is her..

What would be the rate of return generated by this project : The South Korean multinational manufacturing firm, Nam Sung Industries, is debating whether to invest in a 2-year project in the United States. If this project were instead undertaken by a similar U.S.-based company with the same risk-adjusted cost o..

Associated with the income potential of property increases : As the degree of risk and uncertainty associated with the income potential of property increases, which of the following will result? If the market value cap rate (yield) on a certain type of property is 10%, and you expect the property to appreciate..

What organization does this website belong to : What organization does this website belong to? What is the SEC?- Which CEOs certified their financial statements on time? Which CEOs were late in certifying their financial statements?

User Account

All Pages