Comet Chasers has a bond outstanding that sells for $1,052 and matures in 22 years. The bond pays semiannual coupons and has a coupon rate of 5.86 percent. The par value is $1,000. If the company's tax rate is 39 percent, what is the aftertax cost of debt?

Comet Chasers has a bond outstanding that sells for $1,052 and matures in 22 years. The bond pays semiannual coupons and has a coupon rate of 5.86 percent. The par value is $1,000. If the company's tax rate is 39 percent, what is the aftertax cost of debt?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4PA: Evie Inc. issued 50 bonds with a $1,000 face value, a five-year life, and a stated annual coupon of...

See similar textbooks

Related questions

Q: Marshall Company is issuing eight-year bonds with a coupon rate of 6.19 percent and semiannual…

A: In this question we need to calculate Bond price and how many bonds does the firm have to sell?

Q: What is the component cost of debt for use in the WACC calculation? Do not round your intermediate…

A: Information Provided: Par value = $1000 Term = 20 years Annual coupon rate = 7% semi-annually…

Q: KatyDid Clothes has a $130 million (face value) 20-year bond issue selling for 102 percent of par…

A: FV = 130 N = 40 (20*2) PV = 132.60 (130*102%) Pmt = 6.50 (130*10%/2)

Q: O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal…

A: Nominal Coupon interest Rate = Annual Interest / Bond Par Value Present Value of cash flows =…

Q: Octopus Transit has a $1,000 par value bond outstanding with 10 years to maturity. The bond carries…

A: Par value of bond = $ 1000 Annual coupon amount = $ 104 Semi annual coupon payment = 104/2 = $ 52…

Q: Dufner Co. issued 15-year bonds one year ago at a coupon rate of 6.6 percent. The bonds make…

A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…

Q: Wesimann Co. issued 10-year bonds a year ago at a coupon rate of 8.8 percent. The bonds make…

A: Given: Compounding is semi annual Years =10 Coupon rate = 8.8% Par value = $1,000 YTM = 7.1%

Q: Draiman Corp has bonds on the market with 14.5 years to maturity, a YTM of 5.3%, a par value of…

A: Years to maturity = 14.5 Years Number of semi annual payments (n) = 14.5*2 = 29 YTM = 5.3% Semi…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

Q: Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $37…

A: Yield to maturity refers to the internal rate of return which is earned by the investor who makes…

Q: Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $26…

A: Here, Tax Rate is 35% Details of First Bond is as follows: Coupon Rate is 7% Face Value (Maturity…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: The question is based on the concept of Financial Management.

Q: Gabriele Enterprises has bonds on the market making annual payments, with eleven years to maturity,…

A: Coupon rate:The coupon rate is the rate of yield provided by the fixed-income securities and it is…

Q: Blossom, Inc., has issued a three-year bond that pays a coupon rate of 6.0 percent. Coupon payments…

A: Bonds are a kind of debt financial instrument which is a fixed-income investment vehicle that…

Q: IBM has issued a 25-year, 4 percent, semiannual bond 7 years ago. The bond currently sells for 98…

A: Given, Bond maturity = 25 years Interest rate = 4% Bond sells for = 98% of par value Tax rate = 21%…

Q: Cote Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: Using excel RATE function

Q: The Sky is the Limit, Inc., has a bond outstanding with a coupon rate of 6.2 percent and semiannual…

A: PERIOD (22*2) 44 COUPON RATE (6.20%/2) 3.10% PMT (COUPON AMOUNT) $31.00 PRESENT VALUE…

Q: Walker Industries has a bond outstanding with 12 years to maturity, a 9% coupon paid annually, and a…

A: Yield to call referred as return that the holders of the bonds received when the bond is held by…

Q: Today Melton Corporation's bonds sold for $1087.50. If the bond's annual coupon payment a is $75.00…

A: A financial instrument that does not affect the ownership of the common shareholders or management…

Q: Bayside Inc. sells $5,000,000 of five-year, 10% bonds at the start of the year. The bonds pay…

A: Value of Bonds=$5,000,000 Coupon rate=10% Years to maturity=5 years Effective yield=9% Bond…

Q: LLC International is issuing a $2,000 par value bond that pays 8 percent annual interest and matures…

A: Given, Face value =$2000 Years =10 Coupon rate =8% price =$1800 using excel rate function to…

Q: Ashes Divide Corporation has bonds on the market with 14.5 years to maturity, a YTM of 6.8 percent,…

A: Price= $924 YTM= 6.8% Time= 14.5 years Face value= $1000 (normally all bonds have the face value of…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: Calculation of After-tax Cost of Debt:The after-tax cost of debt is 4.48%.Excel Spreadsheet:

Q: Bartlett Co. wants to issue sixty 20-year, $1,000 par value, zero-coupon bonds. If each bond is…

A: Par value = FV = $1000 Years to maturity = n = 20 years Yield rate = r = 7% Number of bonds = N =…

Q: Several years ago a company sold a $1,000 par value, noncallable bond that now has 20 years to…

A: The cost of debt can be solved with help of Rate Function of Excel. The Rate function can be found…

Q: Enterprise, Inc. bonds have an annual coupon rate of 13 percent. The interest is paid semiannually…

A: The annual coupon rate of the bond is 13%. The maturity is 14 years. The face value of the bond is…

Q: Gabriele Enterprises has bonds on the market making annual payments, with 12 years to maturity, a…

A: Face value = $1,000 Price of bond = $820 Yield to Maturity = 11% Time Period = 12 Years

Q: Peking Duct Tape Company has outstanding a $1,000-face-value bond with a 14 percent coupon rate and…

A: Using excel PV function

Q: Georga's Restaurants has 7,000 bonds outstanding with a face value of $1,000 each, a market price of…

A: Interest Tax Shield : It is the tax benefit or tax savings on interest payment on loan or debt…

Q: The semi-annual, twenty-year bonds of Bempa, Inc. are selling at par and have an effective annual…

A: The amount of each interest payment or the amount of each coupon payment can be found through the…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: Here, To Find: After-tax cost of the company's debt =?

Q: Compute the yield to maturity on the old issue and use this as the yield for the new issue. Yield…

A: Yield to Maturity: It is the minimum rate for the bondholder to invest in the company (issuer). The…

Q: dufner Corp. issued 14-year bonds one years ago at a coupon rate of 7.9 percent. The bonds make…

A: Bonds are units of corporate securities that are securitized as tradeable assets and issued by…

Q: Russell Container Corporation has a $1,000 par value bond outstanding with 30 years to maturity. The…

A: Yield to maturity is the rate of return that an investor may expect from its investment in bond if…

Q: Nungesser Corporation has issued bonds that have a 9 percent coupon rate, payable semiannually. The…

A: This question require us to compute the price of the bonds from below given details: Coupon rate =…

Q: BA Corp is issuing a 10-year bond with a coupon rate of 8 percent. The interest rate for similar…

A: Note: You have posted several different questions at once. I have answered the first question in…

Q: Galvatron Metals has a bond outstanding with a coupon rate of 6.1 percent and semiannual payments.…

A: The after-tax cost of debt is the interest paid on debt after deducting the saving on income tax due…

Q: Gabriele Enterprises has bonds on the market making annual payments, with 10 years to maturity, a…

Q: Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds…

A: After tax cost of debt = before tax cost of debt*(1-taxrate) Before tax cost of debt = YTM of the…

Q: Rhiannon Corporation has bonds on the market with 16.5 years to maturity, a YTM of 7.7 percent, a…

A: Solution- Number of periods = 16.5 * 2 = 33 Rate = 7.7% / 2 = 3.85% price = Semi annual coupon…

Q: Renfro Rentals has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature…

A: Bond generated by present discounted value of future amount is called Bond price.

Q: firm’s

A: Introduction: The after tax cost of debt is nothing but yield to maturity. Yeild to maturity is…

Q: Dixon Corp has 6% coupon bonds outstanding that have a remaining maturity of 12 years. These bonds…

A: Given: Coupon rate = 6% Years to maturity = 12 years Current price = $1,080 Face value = $1,000 Tax…

Question

100%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Calculation of After-tax Cost of Debt:

VIEW

Excel Workings:

VIEW

Answer:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Neubert Enterprises recently issued $1,000 par value 15-year bonds with a 5% coupon paid annually and warrants attached. These bonds are currently trading for $1,000. Neubert also has outstanding $1,000 par value 15-year straight debt with a 7% coupon paid annually, also trading for $1,000. What is the implied value of the warrants attached to each bond?
Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
Krystian Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 4% when the market rate was 6%. Interest was paid semi-annually. Calculate and explain the timing of the cash flows the purchaser of the bonds (the investor) will receive throughout the bond term. Would an investor be willing to pay more or less than face value for this bond?
Evie Inc. issued 50 bonds with a $1,000 face value, a five-year life, and a stated annual coupon of 6% for $980 each. What is the total amount of interest expense over the life of the bonds?