Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 14 percent and will be sold at a market price of $1050. Flotation costs will amount to 6 percent of market value. The bonds will mature in 15 years and nterest payments will be made semi-annually. The company's marginal tax rate is 21%. What is the firm's after-tax cost of debt financing?
Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 14 percent and will be sold at a market price of $1050. Flotation costs will amount to 6 percent of market value. The bonds will mature in 15 years and nterest payments will be made semi-annually. The company's marginal tax rate is 21%. What is the firm's after-tax cost of debt financing?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 33P: Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand...
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