Answered: Walter Corp.'s outstanding bonds have a…

Walter Corp.'s outstanding bonds have a 5.8% coupon, 5 years left until maturity, and are currently priced at $974.67. The firm's marginal tax rate is 25%. Walter's after-tax cost of debt is_______?

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

See similar textbooks

Related questions

Q: Avicorp has a $13.6 million debt issue outstanding, with a 6.2 %coupon rate. The debt has…

A: a.Computation of the pre-tax cost of debt:

Q: JP Smith, Inc has an outstanding bond issue, which has eight years remaining to maturity and a…

A: Par value = $ 1000 Coupon rate = 4.250% Semi annual coupon amount = 1000*0.0425*1/2 = $ 21.25 Years…

Q: Neptune Corporation's bonds have 20-years to maturity and a coupon rate of 8.5%. Interest is paid…

A: Bonds are debt instruments that are issued by entities to raise funds and meet their capital…

Q: Scherr Enterprises has a series of 7 percent coupon bonds outstanding with a $1,000 par value. The…

A: Face value = $1000 Coupon = 7% of $1000 = $70 Duration till maturity (n) = 10 years Bond price =…

Q: Avicorp has a $14.6 million debt issue outstanding, with a 5.8% coupon rate. The debt has…

A: Cost of debt refers to the minimum cost that a company has to bear for raising funds through the…

Q: Safeway Stores issued a 15-year bond 5 years ago; it has $1,000 face value and a 7% coupon rate. If…

A: The cost of debts is the effective interest rate paid by the company to the investors on the amount…

Q: Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28…

A: Part (a): Calculation of before tax cost of debt: Answer: Before tax cost of debt is 7.22%

Q: St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate…

A: A financial instrument with a fixed cost that helps a company to raise funds for business operations…

Q: The Leveraged Corporation has an 8-year bond outstanding with a coupon rate of 12 percent and a…

A: After tax cost of debt = Before tax cost of debt * (1-tax rate)

Q: Several years ago, the ABC Company sold a $1,000 par value bond that now has 20 years to maturity…

Q: Estimate Dixon's marginal pre-tax cost of debt.

A: Yield to Maturity refers to the rate of interest earned till the maturity of the bond by the bond…

Q: AAPL Inc. is a publicly traded company that has $120 million in bank loan on its books, with a…

A: Cost of debt: It is the interest that the company pays to its debt holders.

Q: Mojo Mining has a bond outstanding that sells for $1,052 and matures in 22 years. The bond pays…

A: Given:

Q: A company has outstanding long-term bonds with a face value of$1,000, a 10% coupon rate, 25 years…

A: COUPON RATE 10.00% YEARS OR PERIOD 25 PRESENT VALUE 1214.82 TAX 40% FACE VALUE 1000

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 6% coupon bond with a face value of $39…

A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…

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: Comet Chasers has a bond outstanding that sells for $1,052 and matures in 22 years. The bond pays…

A: Excel Spreadsheet:

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

A: Using excel RATE function

Q: Simple Foods has a zero coupon bond issue outstanding that matures at nine years. The bonds are…

A: The company has a zero coupon bond that matures in 9 years with semiannual compounding.Par Value…

Q: Russell Container Corporation has a RM1,000 par value bonds outstanding with 20 years to maturity.…

A: Bonds: Bonds are a debt instrument on which interest is paid. They can be issued at a discount/par…

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: 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,550 face value…

A: Pre tax cost of debt is yield to maturity of the bond we deduct tax from cost of debt because…

Q: KatyDid Clothes has a $150 million (face value) 30-year bond issue selling for 104 percent of par…

A: Cost of debt is yield to maturity on the bond and yield is calculated using rate function in excel

Q: atyDid Clothes has a $170 million (face value) 20-year bond issue selling for 104 percent of par…

A: Yield to maturity(YTM) is the rate of return that investor will get if hold bond till maturity and…

Q: Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and…

A: The cost of raising the funds through borrowing or the financing cost is termed as the required rate…

Q: Company B has $50 million of bonds outstanding (face value). These are 10-year bonds, and they are…

A: The cost of raising the funds through borrowing or the financing cost is termed as the required rate…

Q: The H-mart’s currently outstanding 6 percent annual coupon bonds have maturity of 20 years with par…

A: Annual coupon rate is 6% Maturity is 20 years Par value is $1,000 Current price of bond is $850 Tax…

Q: The Besson Co. is going to issue a twenty-year 8% (annual) coupon bond making semi-annual coupon…

A: Yield to maturity (YTM) is the rate of return that the bond provides to its holders if its held till…

Q: Sony bonds were issued 8 years ago with a coupon rate of 9%. The bond has 2 years left to maturity…

A: A bond is a financial instrument that is issued by a corporation in the financial markets. Bonds are…

Q: Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate…

A: Debt financing is considered in order to reduce the tax liability of the company. When the debt…

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: Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and…

A: For a bond Yield to maturity shows the effective interest payment on the bond.

Q: Olympic Sports has two issues of debt outstanding. One is a 5% coupon bond with a face value of $33…

A: Cost of debt is the rate at which the firm procures the debt from external source of finance. The…

Q: Melekom Berhad has 16 years to maturity bond with a RM1,000.00 par value. The bond pays RM7S.00 a…

A: Note: Here it is assumed that the Interest amount is RM75 per year and the selling price is RM550.…

Q: Avicorp has a $11.7 million debt issue outstanding, with a 5.8% coupon rate. The debt has…

A: Debt refers to the amount borrowed by a firm to finance its operations. It forms part of the…

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: Suppose ABE Co. issued a 20-year, 8 percent coupon rate bond three years ago. The bond is currently…

A: YEARS (20-3) 17 COUPON RATE 8% PMT (COUPON AMOUNT) $80 PRESENT VALUE $715 FACE VALUE (FV)…

Q: Sandhill has determined that it could issue $1050 face value bonds with an 8 percent coupon paid…

A: Pre tax cost of debt is yield to maturity on the bond As we get tax deduction from interest…

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: Carraway Seed Company is issuing a $1,000 par value bond that pays 8 percent annual interest and…

A: Cost of debt is the total expense incurred while raising funds through debt instruments. It includes…

Q: firm’s

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

Question

Walter Corp.'s outstanding bonds have a 5.8% coupon, 5 years left until maturity, and are currently priced at $974.67. The firm's marginal tax rate is 25%.

Walter's after-tax cost of debt is_______?

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

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 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

Waylan Sisters Inc. issued 3-year bonds with a par value of $100,000 and a 6% annual coupon when the market rate of interest was 5%. If the bonds sold at 102.438, how much cash did Williams Sisters Inc. receive from issuing the bonds?
Lugget Corp. has one bond issue outstanding with an annual coupon of 4%, a face value of $1,000 and a price of $1,179.65, which matures in 10 years. The company's tax rate is 25%. What is the company's after-tax cost of debt?
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?
Lugget Corp. has one bond issue outstanding with an annual coupon of 3.8%, a face value of $1,000 and a price of $983.78, which matures in 10 years. The company's tax rate is 25%. What is Lugget's pre-tax cost of debt?
Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $951 and matures in 23 years. The par value is $1,000 and the company's tax rate is 35 percent. What is the company's aftertax cost of debt?
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?
Scherr Enterprises has a series of 7 percent coupon bonds outstanding with a $1,000 par value. The bonds mature in 10 years and currently sell for $1,068. Scherr’s marginal tax rate is 40 percent. What is the marginal after-tax cost of debt for Scherr? (Assume annual interest payments).
Mojo Mining has a bond outstanding that sells for $2,120 and matures in 18 years. The bond pays semiannual coupons and has a coupon rate of 6.66 percent. The par value is $2,000. If the company's tax rate is 40 percent, what is the aftertax cost of debt?
Beckham Corporation has semiannual bonds outstanding with 15 years to maturity and the bonds are currently priced at $846.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? 5.283% 6.868% 10.401% 7.655%