Delayed Exports has four bonds outstanding. If the relevant tax rate is 35 percent, what is...

Delayed Exports has four bonds outstanding. If the relevant tax rate is 35 percent, what is the after-tax cost of Delayed Exports' debt ? (Do not round your intermediate calculations.)

Bond	Coupon Rate	Yield to Maturity	Price Quote (% of Face Value)	Maturity	Face Value
1	6.50%	6.30%	101	6 years	$ 25,000,000
2	7.60%	6.01%	110	8 years	$ 41,000,000
3	6.70%	6.42%	103	18 years	$ 45,000,000
4	7.70%	6.55%	115	30 years	$ 56,000,000

Expert Solution


		Weight Average Cost =SUMof( Weight* Yield tomaturity)

		A	B	C	D	E	F=C*E	G=F/181100000	H=B*G
	Bond	Coupon Rate	Yield to Maturity	Price Quote (% of Face Value)	Maturity	Face Value	Market Value	Weight	Yield *Weight
	1	6.50%	6.30%	101%	6 years	$25,000,000	$25,250,000	0.1394	0.88%
	2	7.60%	6.01%	110%	8 years	$41,000,000	$45,100,000	0.2490	1.50%
	3	6.70%	6.42%	103%	18 years	$45,000,000	$46,350,000	0.2559	1.64%
	4	7.70%	6.55%	115%	30 years	$56,000,000	$64,400,000	0.3556	2.33%
						TOTAL	$181,100,000	1.00	6.35%
Before tax cost of Debt	6.35%
After tax cost of debt =6.35*(1-Tax Rate)	4.13%	6.35*(1-0.35)

jeff jeffy answered 6 months ago

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