CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
14th Edition
ISBN: 9780357292839
Author: MOYER
Publisher: CENGAGE L
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Chapter 12, Problem 1P
Summary Introduction
To determine: After tax debt.
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Determine the (after-tax) percentage cost of a $50 million debt issue that the Mattingly Corporation is planning to place privately with a large insurance company. Assume that the company has a 40% marginal tax rate. This long-term debt issue will yield 20% to the insurance company. 4.8% 7.2% 12.0% 10.6%
Determine the (after-tax) component cost of a $50 million debt issue that the Mattingly Corporation is planning to place with a large insurance company. Assume the company is subject to a 40% tax rate. This long-term debt issue will yield 12% to the insurance company.
An overview of a firm's cost of debt
To calculate the after-tax cost of debt, multiply the before-tax cost of debt by .
Three Waters Company (TWC) can borrow funds at an interest rate of 10.20% for a period of six years. Its marginal federal-plus-state tax rate is 25%. TWC’s after-tax cost of debt is (rounded to two decimal places).
At the present time, Three Waters Company (TWC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,495.56 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If TWC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.)
3.38%
2.35%
2.94%
3.53%
Chapter 12 Solutions
CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
Ch. 12 - Prob. 1QTDCh. 12 - Prob. 2QTDCh. 12 - Prob. 3QTDCh. 12 - Prob. 4QTDCh. 12 - Prob. 5QTDCh. 12 - Prob. 6QTDCh. 12 - Prob. 7QTDCh. 12 - Prob. 8QTDCh. 12 - Prob. 9QTDCh. 12 - Prob. 10QTD
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