Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Textbook Question
Chapter 11, Problem 12P
KeySpan Corp. is planning to issue debt that will mature in 2035. In many respects, the issue is similar to currently outstanding debt of the corporation.
a. Using Table 11-3, identify the yield to maturity on similarly outstanding debt for the firm in terms of maturity.
b. Assume that because the new debt will be issued at par, the required yield to maturity will be 0.15 percent higher than the value determined in part a. Add this factor to the answer in a. (New issues sold at par sometimes require a slightly higher yield than older seasoned issues because there are fewer tax advantages and more financial leverage that increase company risk.)
c. If the firm is in a 30 percent tax bracket, what is the aftertax cost of debt?
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Chapter 11 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
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