Ladder Works has debt outstanding with a coupon rate of 6 percent and a yield to maturity of 6.8 percent. What is the aftertax cost of debt if the tax rate is 21 percent? Assume all interest is tax deductible. 5.62% 5.82% 5.37% 4.86%
Q: Starset, Incorporated, has a target debt-equity ratio of 0.76. Its WACC is 10.5 percent, and the tax…
A: Pretax cost of debt can be calculated through the WACC equation and debt-equity ratio. Here…
Q: A bond has a $15million face value and a coupon rate of 9 percent. It has floatation costs of 5…
A: The cost of raising the funds through borrowing or the financing cost is termed as the required rate…
Q: The following is the information on debt issued by Huntington Power Co. Calculate the after-tax cost…
A: Interest on debt is a tax deductible expense, that's why after tax cost of debt is taken.
Q: The coupon rate on a debt issue is 6%. If the yield to maturity on the debt is 9%, what is the…
A: Before tax cost of debt = YTM on the bond
Q: Calculating the WACC In the previous problem, suppose the company's stock has a beta of 1.10. The…
A: Capital structure refers to the proportion of debt and equity capital raised by the company in order…
Q: A company finances its operations with 60 percent debt and the rest using equity. The annual yield…
A: Given: Debt (D) = 60% Equity (E) = 40% Cost of debt (rd) = 4.1% Cost of equity (re) = 12.4% Tax =…
Q: The yield to maturity on SodaFizz’s debt is 7.2%. If the company’s marginal tax rate is 21%, what is…
A: To calculate the effective cost of debt we will use the below formula Effective cost of debt =…
Q: Avicorp has a $13.3 million debt issue outstanding, with a 6.1% coupon rate. The debt has…
A: Yield-to-Maturity is IRR for Bond Payments that shows effective return that an investor will receive…
Q: 9. Avicorp has a $11.7 million debt issue outstanding, with a 5.8% coupon rate. The debt has…
A: The cost of debt is the yield to maturity of a bond. It is the rate at which borrowed funds can be…
Q: onsider a firm whose debt has a market value of $35 million and whose stock has a market value of…
A: GIVEN, DEBT = $35 EQUITY=$55 rf = 1% beta = 1.23 risk premium = 10.5%
Q: Sixx AM Manufacturing has a target debt-equity ratio of 0.7. Its cost of equity is 17 percent, and…
A: WACC = Weight of debt * Cost of debt + Weight of equity * Cost of equity Cost of debt = Cost * ( 1 -…
Q: DQ, Inc. expects EBIT to be approximately $11.4 million per year for the foreseeable future, and it…
A: EBIT - $11.40 million Bond :no of bonds- 20,000 Interest rate -10% Face value - $1000 Annual…
Q: Kose, Inc., has a target debt-equity ratio of 1.31. Its WACC is 8.1 percent, and the tax rate is 22…
A: Kose, Inc., has a target debt-equity ratio of 1.31. Its WACC is 8.1 percent, and the tax rate is 22…
Q: A firm has outstanding debt with a coupon rate of 8%, nine years maturity, and a price of $1,000…
A: Yield to maturity is equal to par value of coupon rate , Bond is equal to par value and as it same…
Q: Laurel, Inc., has debt outstanding with a coupon rate of 6.1% and a yield to maturity of 7.2%. Its…
A: Effective after tax cost of debt = Before tax cost of debt (YTM) * (1- tax rate)
Q: Fama's Llamas has a weighted average cost of capital of 10 percent. The company's cost of equity is…
A: Debt-Equity Ratio is long-term solvency ratio of company. It is calculated by dividing debt by…
Q: Walter Corp.'s outstanding bonds have a 5.8% coupon, 5 years left until maturity, and are currently…
A: Given, Price = $974.67 Coupon rate = 5.8% Number of years = 5 Tax = 0.25 Assume the par value of…
Q: Calculate the after-tax cost of debt under each of the following conditions: rdof 13%, tax rate of…
A: 1. After tax cost of debt = Cost of debt * (1- Tax rate) After tax cost of debt = 13% * (1-0%) After…
Q: Madoff Corporation raised money through a bond issue with a total principal value of $3,000,000.…
A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…
Q: A company has $5 million in debt outstanding with a coupon rate of 12%. Currently, the yield to…
A: The provided information are: Tax rate = 40% = 0.40 Yield to maturity = 0.14
Q: Compute the cost of capital for the firm with a bond selling to yield 12.9 percent for the purchaser…
A: WACC is estimated cost of incurred by an entity to finance their capital structure that is computed…
Q: Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and…
A: Here, Maturity = 10.5 years Coupon rate = 3.6% Yield to maturity = 5.4% Average tax rate = 18%…
Q: Laurel, Inc., has debt outstanding with a coupon rate of 5.8% and a yield to maturity of 6.8%. Its…
A: Effective after-tax cost of debt The interest paid on debt less any income tax savings owing to…
Q: Terrier Company is in a 50 percent tax bracket and has a bond outstanding that yields 12 percent to…
A: A debt is a security instrument that I s issued by the organization to raise the funds from the…
Q: Austin's Cookies has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is…
A: Weighted Average Cost of Capital (WACC) is the overall cost of capital from all the sources of…
Q: Lionel Company has 1,500 units of bonds outstanding. Each unit has $100 face value, 6% coupon rate…
A: Here, Units of Bond is 1,500 Face Value of Each Bond is $100 Coupon Rate is 6% Coupon Compounding…
Q: Avicorp has a $12.8 million debt issue outstanding, with a 5.9% coupon rate. The debt has…
A: Let Face value = $1000 Current Price = 93% of par value = $930 Coupon rate = 5.9% Semi annual rate =…
Q: If a 5 year annual bond with a 6% coupon rate, currently priced at $988 and par value is $1000, what…
A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…
Q: What would be BAT's current before-tax component cost of debt? a. What would be BAT's current…
A: Cost of Debt: It is the cost of raising debt capital for the company and the such cost of debt is…
Q: Laurel, Inc., has debt outstanding with a coupon rate of 5.8%and a yield to maturity of 7.1%.Its…
A: For the calculation of effective after tax cost of debt we will use the below formula After tax…
Q: Lewis, Schultz, and Nobel Development Corp. have an after-tax cost of debt of 4.5%. With a tax rate…
A: In this question we are given after tax cost of debt and tax rate and we need to compute the Yield…
Q: AXYZ Co's. bond has a $1,000 face value and a coupon rate of 6.2% paid annually. The firm's marginal…
A: Calculation of cost of debt after tax:Answer:Cost of debt after-tax rate is 4.03% and 4.65%, tax cut…
Q: ACT Inc. has a $1,000 (face value), 20 year bond issue selling for $1,229.40 that pays an annual…
A: 1. What would be BAT's current before-tax component cost of debt It can be calculated using rate…
Q: Gina Electronics Inc. has long-term bonds with a face value of $2M, the coupon rate on the bonds is…
A: Weighted average cost of capital is total cost of raising funds for the business and it includes…
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: Butler, Inc., has a target debt-equity ratio of 1.60. Its WACC is 7.8 percent, and the tax rate is…
A: WACC = Post tax Cost of debt * Weight of debt + Cost of equity * Weight of equity
Q: LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 5.7%. LL…
A: Debt is an obligation for the company for which an interest has to be paid by the company.
Q: Kountry Kitchen has a cost of equity of 12.5 percent, a pretax cost of debt of 5.8 percent, and the…
A: Cost of equity, Ke = 125%,Pretax cost of debt, Kd = 5.8%Tax rate, T = 35%WACC = 9.16%Let's assume…
Q: A company has $5 million in debt outstanding with a coupon rate of 12%. Currently, the yield to…
A: Bonds are the debt obligations of a business on which it requires to pay regular interest to the…
Q: Fama’s Llamas has a weighted average cost of capital of 8.4 percent. The company’s cost of equity is…
A: The formula used is shown:
Q: ACT Inc. has a $1,000 (face value), 30 year bond issue selling for $838.88 that pays an annual…
A: Cost of Debt: It is the rate of return that is paid by companies on its debt obligations. These debt…
Q: Need help with both questions
A: Calculate the cost of debt as follows:
Q: a firm has a debt-to-equity ratio of 1.0. if we assume that the firm's debt pays 11% interest…
A: Hence, cost of debt after tax is 6.6%.The cost of debt is determined by multiplying cost of debt…
Q: The coupon rate on a debt issue is 6%. If the yield to maturity on the debt is 9%, what is the…
A: Given, Coupon rate on debt = 6% Yield to maturity on debt = 9% Tax rate = 34% = 0.34 From these…
Q: Laurel, Inc., has debt outstanding with a coupon rate of 6.0% and a yield to maturity of 7.0%. Its…
A: Effective Annual Rate: The effective annual rate of interest is the actual or the real rate of…
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- Mint Industries has a target debt-equity ratio of 0.60, a cost of equity of 10%, and one issue of bonds that are offering a yield to maturity of 7.67%. If Minder’s tax rate is 40%, what is the company’s WACC?Avicorp has a $13.6 million debt issue outstanding, with a 6.2 %coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 94 % of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.Lugget Corp. has one bond issue outstanding with an annual coupon of 4.4%, a face value of $1,000 and a price of $1,119.42, which matures in 10 years. The company's tax rate is 30%. 1. What is Lugget's pre-tax cost of debt? 2. What is the company's after-tax cost of debt?
- LL Incorporated’s currently outstanding 7 percent coupon bonds have a yield to maturity of 6 percent. LL believes it could sell new bonds that would provide a similar yield to maturity. If its marginal tax rate is 34 percent, what is LL’s after-tax cost of debt? Express your answer in percentage (without the % sign) and round it to two decimal places.Calculate the after-tax cost of debt under each of the following conditions: rdof 13%, tax rate of 0% 2. rdof 13%, tax rate of 20% 3. rdof 13%, tax rate of 35% 9-2 LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is LL’s after-tax cost of debt? 9-3 Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring flotation costs, what is the company’s cost of preferred stock, rps?The yield to maturity on SodaFizz’s debt is 7.2%. If the company’s marginal tax rate is 21%, what is SodaFizz’s effective cost of debt?
- Sabine Co has outstanding bonds with 10 years remaining until maturity, a coupon rate of 7%, semi-annual coupon payments, and a market price of 96.5% of par value. If the tax rate is 16%, what is the firm's after-tax cost of debt? Enter your answer as an annualized rate in decimal format, and show four decimal places. For example, if your answer is 5.1%, enter .0510.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.)Rappaport Industries has 6,250 perpetual bonds outstanding with a face value of $2,000 each. The bonds have a coupon rate of 6.0 percent and a yield to maturity of 6.3 percent. The tax rate is 35 percent. What is the present value of the interest tax shield?
- 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?Starset, Incorporated, has a target debt-equity ratio of 0.76. Its WACC is 10.5 percent, and the tax rate is 32 percent. If the company's cost of equity is 14.5 percent, what is the pretax cost of debt? If instead you know that the aftertax cost of debt is 6.7 percent, what is the cost of equity?A company has outstanding 20-year noncallable bonds with a face value of $1,000,an 11% annual coupon, and a market price of $1,294.54. If the company was to issuenew debt, what would be a reasonable estimate of the interest rate on that debt? Ifthe company’s tax rate is 40%, what is its after-tax cost of debt?