Fundamentals Of Corporate Finance, 9th Edition
9th Edition
ISBN: 9781260052220
Author: Richard Brealey; Stewart Myers; Alan Marcus
Publisher: McGraw-Hill Education
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Chapter 13, Problem 18QP
a)
Summary Introduction
To compute: The cost of debt before tax.
b)
Summary Introduction
To compute: The cost of debt after tax.
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Olympic Sports has two issues of debt outstanding. One is a 9% coupon bond with a face value of $20 million, a maturity of 10 years, and a yield to maturity of 10%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 10%. The face value of the issue is $25 million, and the issue sells for 94% of par value. The firm's tax rate is 21%.
What is the before-tax cost of debt for Olympic?
What is Olympic's after-tax cost of debt?
Note: For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $26 million, a maturity of 15 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with coupons also paid annually, and a coupon rate of 8%. The face value of the issue is $31 million, and this issue sells for 96% of par value. The firms tax rate is 35%.
a). What is the before-tax cost of debt for Olympic?
b). What is Olympics after-tax cost of debt?
(For all requirements, do not round intermediate calculations. Enter your answers as a percent to 2 decimal places.)
Olympic Sports has two issues of debt outstanding. One is a 5% coupon bond with a face value of $33 million, a maturity of 10 years, and a yield to maturity of 6%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 6%. The face value of the issue is $38 million, and the issue sells for 90% of par value. The firm's tax rate is 30%.
a. What is the before-tax cost of debt for Olympic?
b. What is Olympic's after-tax cost of debt?
(For all the requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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Fundamentals Of Corporate Finance, 9th Edition
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What is WACC-Weighted average cost of capital; Author: Learn to invest;https://www.youtube.com/watch?v=0inqw9cCJnM;License: Standard YouTube License, CC-BY