LLC International is issuing a $2,000 par value bond that pays 8 percent annual interest and matures in 10 years. Investors are willing to pay $1,800 for the bond. Floatation costs will be 4 percent of market value. The Company is in a 20 percent tax bracket. What will be the firm’s after-tax cost of debt on the bond??
LLC International is issuing a $2,000 par value bond that pays 8 percent annual interest and matures in 10 years. Investors are willing to pay $1,800 for the bond. Floatation costs will be 4 percent of market value. The Company is in a 20 percent tax bracket. What will be the firm’s after-tax cost of debt on the bond??
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 14P
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Question
- LLC International is issuing a $2,000 par
value bond that pays 8 percent annual interest and matures in 10 years. Investors are willing to pay $1,800 for the bond. Floatation costs will be 4 percent of market value. The Company is in a 20 percent tax bracket. What will be the firm’s after-tax cost of debt on the bond??
![LLC International is issuing a $2,000 par value bond that pays 8 percent annual interest and
matures in 10 years. Investors are willing to pay $1,800 for the bond. Floatation costs will be 4
percent of market value. The Company is in a 20 percent tax bracket. What will be the firm's
Question 7.
after-tax cost of debt on the bond??](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2d924ad7-560a-46a5-8350-1620e526e6e5%2Fbfc60c2a-da39-490a-bfd9-239e1a4d51b1%2F6trwoma_processed.jpeg&w=3840&q=75)
Transcribed Image Text:LLC International is issuing a $2,000 par value bond that pays 8 percent annual interest and
matures in 10 years. Investors are willing to pay $1,800 for the bond. Floatation costs will be 4
percent of market value. The Company is in a 20 percent tax bracket. What will be the firm's
Question 7.
after-tax cost of debt on the bond??
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