AXYZ Co's. bond has a $1,000 face value and a coupon rate of 6.2% paid annually. The firm's marginal tax rate is 35%. Assuming no flotation costs, what is the after-tax cost of debt for XYZ Co.? 9. Where kdtar =After tax cost of debt ka kahu (1-t) kabe = Before tax cost of debt t Marginal tax rate in decimal format x (1 kdat What would be XYZ Co's. after tax cost of debt if corporate tax rates are reduced by 10% across the board making XYZ Co's. marginal tax rate 25%? kdat x (1-_ Based on these results, does a tax cut make debt more or less preferable than equity financing? Circle your answer LESS PREFERABLE MORE PREFERABLE

AXYZ Co's. bond has a $1,000 face value and a coupon rate of 6.2% paid annually. The firm's marginal tax rate is 35%. Assuming no flotation costs, what is the after-tax cost of debt for XYZ Co.? 9. Where kdtar =After tax cost of debt ka kahu (1-t) kabe = Before tax cost of debt t Marginal tax rate in decimal format x (1 kdat What would be XYZ Co's. after tax cost of debt if corporate tax rates are reduced by 10% across the board making XYZ Co's. marginal tax rate 25%? kdat x (1-_ Based on these results, does a tax cut make debt more or less preferable than equity financing? Circle your answer LESS PREFERABLE MORE PREFERABLE

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 9P: Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value...

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Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value bond that matures in 30 years sells at a price of 515.16. The companys federal-plus-state tax rate is 40%. What is the firms after-tax component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate.)
Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.
Laurel, Inc., has debt outstanding with a coupon rate of 5.8% and a yield to maturity of 7.1%. Its tax rate is 35%. What is Laurel's effective (after-tax) cost of debt? NOTE: Assume that the debt has annual coupons and that the firm will always be able to utilize its full interest tax shield. The effective after-tax cost of debt is __ % ? (Round to four decimal places.)
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ABC Company has a BB credit rating. Companies with similar credit ratings are currently paying a premium of 150 basis points (2.84%) above the yield on U.S. Treasury bonds of 2.25% p.a. on similar term bonds. The company faces a marginal tax rate of 31 percent. What would be the after-tax cost of debt used in calculating the company's weighted average cost of capital? Present your answer in percentage terms, rounded to two decimal places (e.g., 4.56%). Round your answer to 2 decimal places. Please show all work and how to set up in excel with formulas.
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Viserion, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 28 years to maturity that is quoted at 106 percent of face value. The issue makes semiannual payments and has an embedded cost of 6 percent annually. What is the company's pretax cost of debt? multiple choice 1 5.57% 6.69% 4.24% 6.13% 5.02% If the tax rate is 24 percent, what is the aftertax cost of debt? multiple choice 2 4.24% 3.81% 4.66% 5.93% 5.57%
A company currently has a bond outstanding that pays 6% coupon rate (coupons paid semiannually), a $1,000 par value and matures in 30 years. The bond is currently trading at $515.16. The company's tax rate is 25%. What is the firm's after-tax component cost of debt for purposes of calculating the weighted average cost of capital ("WACC")? Please show formulas, step by step instructions (without a financial calculator or Excel)
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