Outstanding debt of Home Depot trades with a yield to maturity of 7%. The tax rate of Home Depot is 40%. What is the effective cost of debt of Home Depot? A. 5.04% B. 4.2% C. 4.62% D. 5.25%
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Q: Outstanding debt of Home Depot trades with a yield to maturity of 6%. The tax rate of Home Depot is…
A: Values provided in the question are as follows: rd=6%tax = 30%
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A: (Note: We’ll answer Part D as it has been specifically asked.) Given : Current assets = $54mCurrent…
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A: Yield to maturity refers to the internal rate of return which is earned by the investor who makes…
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A: a) Cost of debt or YTM can be calculated in the excel as below: Answer: YTM = rd=8.00%
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A: given, Debt/Equity ratio = 1 cost of debt =8%
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A: to find the after tax cost of debt, we will use the following formula Kd = [(I/P(1-F)] (1-T) Where,…
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A: Solution- (a)Pre taxed cost of debt its yield to maturity YTMAssume that face value or par value of…
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A: A- 13.41 percent
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A: COUPON RATE 10.00% YEARS OR PERIOD 25 PRESENT VALUE 1214.82 TAX 40% FACE VALUE 1000
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A: The weighted average cost of capital is the average cost of raising capital a company has to bear.…
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A: Effective after tax cost of debt = Before tax cost of debt (YTM) * (1- tax rate)
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A: WACC used to represent the cost of capital of the company, where each and every category of the…
Q: Leonardo Co. has a debt to equity ratio of 0.65. The company is considering a new plant that will…
A: Weight of debt = Debt / (1+ debt) Weight of debt = 0.65/1.65 Weight of debt =39.39% Weight of equity…
Q: Summit Builders has a market debt-equity ratio of 0.25, a corporate tax rate of 40%, and pays 7%…
A: Weight of debt = Debt/ (Debt + equity) Weight of debt = 0.25/1.25 =20%
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A: Cost of Debt It is the cost of raising capital of debt sources by the issuer(company).…
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A: Annual interest payment = P88 Maturity value = P1,000 Tax rate = 0.30 Current price = P925 Maturity…
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A: To find the cost of debt we will use the following formula: Kd = (C/P) * (1-T) Where: Kd = Cost of…
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A: Given Information: Cost of debt - 7% Tax rate - 30%
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A: After Cost of Debt = Total Interest Cost Incurred * (1 - Effective Tax rate) / Total Debt * 100…
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A: Calculation of cost of debt after tax:Answer:Cost of debt after-tax rate is 4.03% and 4.65%, tax cut…
Q: A company has a $500 000 million loan with a 7% interest rate and a $300,000 loan with an 8% rate.…
A: Loan A amount = $500,000 Interest rate on loan A = 7% Loan B amount = $300,000 Interest rate on loan…
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A: a) The question gives the following information:
Q: A company has debt, equity share and overdraft financing. The overdraft is used to finance the…
A: After tax cost of debt = 12% Cost of equity = 20% After tax cost of overdraft = 18%
Q: Outstanding debt of Home Depot trades with a yield to maturity of 8%. The tax rate of Home Depot is…
A: Cost of debt: The minimum rate of return that a debt holder expects to earn from the debt…
Q: Shanken Corp. issued a 30-year, 6.2 percent semiannual bond 7 years ago. The bond currently sells…
A: Using rate function in excel
Q: Determine the after-tax yield (i.e., IRR on the ATCF) obtained by an individual who purchases a…
A: The IRR is the rate at which the cost to purchase an asset is equal to the present value of cash…
Q: (Cost of debt) Belton Distribution Company is issuing a $1,000 par value bond that pays 7.0 percent…
A: Par value = $ 1000 Coupon rate = 7% Semi annual coupon amount = 1000*0.07/2 = $ 35 Years to maturity…
Q: Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently…
A: Using excel rate function
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A: Weighted Average cost of capital helps in determining the cost of financing with different capital…
Q: Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently…
A: Information Provided: Term = 30 years Coupon rate = 8% semi-annually 3 years ago Selling price = 93%…
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A: a) The pre-taxed cost of debt is its yield to maturity (YTM) Assume that Face value or par value of…
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A: WACC of the company is calculated as sum of weighted cost of capital of each source
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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.)Outstanding debt of Home Depot trades with a yield to maturity of 8%. The tax rate of Home Depot is 30%. What is the effective cost of debt of Home Depot?Outstanding debt of Home Depot trades with a yield to maturity of 6%.The tax rate of Home Depot is 30%.What is the effective cost of debt of Home Depot? A. 5.25% B. 4.2% C. 5.04% D. 4.62%
- Telecom Systems can issue debt yielding 7 percent. The company is in a 30 percent bracket. What is its aftertax cost of debt? (Input your answer as a percent rounded to 2 decimal places.)Telecom Systems can issue debt yielding 4 percent. The company is in a 25 percent bracket. What is its aftertax cost of debt?The following is the information on debt issued by Huntington Power Co. Calculate the after-tax cost of debt for the firm. Debt: 4 percent coupon paid semiannually, $1,000 par value, 15 years to maturity, current market price of the bond is $889.0. Tax rate is 20%.
- Austin's Cookies has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes. Format as a percentage, round to two places past the decimal point, and format as "X.XX"BBB company has $54 million of current assets and $58 million of noncurrent assets. It forecastsan EBIT of $10.4 million and pays income taxes at a 35% rate. Short-term bank notes carry a 5%interest rate, and the company can issue long-term bonds at 7%. The company has set a targetdebt ratio of 45%. Required: A. For a maturity mix of 60% current and 40% long-term debt, prepare the company'sabbreviated balance sheet. B. For a maturity mix of 60% current and 40% long-term debt, prepare the company'sfinancial half of its income statement. C. Based on the financial statements above, calculate the return on equity ratio in order toevaluate the company's risk and return. D. Based on the financial statements above, calculate the current ratio in order to evaluatethe company's risk and return.Wholesale Supply has earnings before interest and taxes of $148,600. Both the book and the market value of debt is $220,000. The unlevered cost of equity is 13.6 percent while the pretax cost of debt is 7.4 percent. The tax rate is 21 percent. What is the weighted average cost of capital?
- ZZZ company has $27 million of current assets and $29 million of noncurrent assets. It forecasts an EBIT of $5.2 million and pays income taxes at a 21% rate. Short-term bank notes carry a 4% interest rate, and the company can issue long-term bonds at 7%. The company has set a target debt ratio of 45%. Required: A. For a maturity mix of 60% current and 40% long-term debt, prepare the company's abbreviated balance sheet. B. For a maturity mix of 60% current and 40% long-term debt, prepare the company's financial half of its income statement. C. Based on the financial statements above, calculate the (1) return on equity ratio and the (2) current ratio in order to evaluate the company's risk and return. I also would love to see the excel formulas pleaseMULTIPLE CHOICE Law Corporation has P5 million of 16 percent mortgage bonds outstanding. The indenture permits additional bonds to be issued as long as the following conditions are satisfied: (a) The before-tax times-interest-earned ratio is greater than 3. (b) Book value of the mortgaged assets are at least four times the amount of debt. (c) The debt/equity ratio is less than 0.8. The following additional data are given: Income before tax is P12 million, equity is P30 million, book value of mortgaged assets is P60 million, and 20 percent of the proceeds of a new issue would be added to the base of mortgaged assets. What amount of additional debt can be issued for each of the conditions (a), (b), and (c)? A. (a)P21,666,667.00, (b) P10,526,305.00, and (c) P19,000,000.00B. (a)P21,666,667.00, (b) P10,526,305.00, and (c) P18,000,000.00C. (a)P20,666,667.00, (b) P11,526,305.00, and (c) P19,000,000.00D. (a)P20,666,667.00, (b) P11,526,305.00, and (c) P20,000,000.00E. None of the aboveICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 6.6 percent annually. What is the company's pretax cost of debt? If the tax rate is 24 percent, what is the aftertax cost of debt? Pretax cost of debt: __________% Aftertax cost of debt: __________%
