Question
In: Finance
Carraway Seed Company is issuing a 1,000 par value bond that pays 6 percent annual interest...
Carraway Seed Company is issuing a
1,000
par value bond that pays
6
percent annual interest and matures in
8
years. Investors are willing to pay
$935
for the bond. Flotation costs will be
11
percent of market value. The company is in a
20
percent tax bracket. What will be the firm's after-tax cost of debt on the bond?
Solutions
jeff jeffy answered 5 months agoRelated Solutions
Carraway Seed Company is issuing a $1,000 par value bond that pays 9 percent annual interest...
Carraway Seed Company is issuing a $1,000 par value bond that
pays 9 percent annual interest and matures in 11 years. Investors
are willing to pay $975 for the bond. Flotation costs will be 14
percent of market value. The company is in a 25 percent tax
bracket. What will be the firm's after-tax cost of debt on
thebond?
Carraway Seed Company is issuing a $1,000 par value bond that pays 11 percent annual interest and matures in 9 years
Carraway Seed Company is issuing a $1,000 par value bond that pays 11 percent annual interest and matures in 9 years. Investors are willing to pay $985 or the bond. Flotation costs will be 11 percent of market value. The company is in a 25 percent tax bracket. What will be the? firm's after-tax cost of debt on the? bond?
The? firm's after-tax cost of debt on the bond will be nothing?%. (Round to two decimal places.)
(Cost of debt) Carraway Seed Company is issuing a $1,000 par value bond that pays 11...
(Cost of debt) Carraway Seed Company is issuing a $1,000 par
value bond that pays 11 percent annual interest and matures in 11
years. Investors are willing to pay $965 for the bond. Flotation
costs will be 13 percent of market value. The company is in a 30
percent tax bracket. What will be the firm's after-tax cost of
debt on thebond?
The firm's after-tax cost of debt on the bond will be ??
(Cost of debt) Carraway Seed Company is issuing a $1000 par value bond that pays 11...
(Cost of debt) Carraway Seed Company is issuing a $1000 par
value bond that pays 11 percent annual interest and matures in 12
years. Investors are willing to pay $945 for the bond. Flotation
costs will be 11 percent of market value. The company is in a 20
percent tax bracket. What will be the firm's after-tax cost of
debt on the bond?
Belton is issuing a $1,000 par value bond that pays 7 percent annual interest and matures...
Belton is issuing a $1,000 par value bond that pays 7 percent
annual interest and matures in 2 years. Investors are willing to
pay $958 for the bond. Flotation costs will be 11 percent of market
value. The company is in an 18 percent tax bracket. What will be
the firm’s after-tax cost of debt on the bond?
Applied Software has a $1,000 par value bond outstanding that pays 20 percent interest with annual...
Applied Software has a $1,000 par value bond outstanding that
pays 20 percent interest with annual payments. The current yield to
maturity on such bonds in the market is 9 percent.
Compute the price of the bonds for these maturity dates:
(Use a Financial calculator to arrive at the
answers. Do not round intermediate calculations.
Round the final answers to 2 decimal places.)
Price of the
bond
a. 30 years
$
b. 18 years
$
c. 4 years
$
You own a bond that pays $100 in annual interest, with a$1,000 par value. It...
You own a bond that pays $100 in annual interest, with a
$1,000 par value. It matures in 10 years. Your required rate of
return is 11 percent.a. Calculate the value of the bond.b. How does the value change if your required rate of return
(1) increases to 16 percent or (2) decreases to 7 percent?c. Explain the implications of your answers in part b as they
relate to interest rate risk, premium bonds, and discount
bonds.d. Assume that the...
You own a bond that pays $100 in annual interest, with a $1,000 par value. It...
You own a bond that pays $100 in annual interest, with a $1,000
par value. It matures in 15 years. The market's required yield to
maturity on a comparable-risk bond is 12 percent.
a.??Calculate the value of the bond.
b.??How does the value change if the yield to maturity on a?
comparable-risk bond? (i) increases to
15
percent or? (ii) decreases to
8
?percent?
c.??Explain the implications of your answers in part b as they
relate to? interest-rate risk, premium?...
You own a bond that pays $100 in annual interest, with a $1,000 par value. It...
You own a bond that pays $100 in annual interest, with a
$1,000 par value. It matures in 20 years. The market's required
yield to maturity on a comparable-risk bond is 11 percent.
a. Calculate the value of the bond.
b. How does the value change if the yield to maturity on a
comparable-risk bond (i) increases to 16 percent or (ii)
decreases to 7 percent?
c. Explain the implications of your answers in part b as they
relate to...
You own a bond that pays $120 in annual interest, with a $1,000 par value. It...
You own a bond that pays $120 in annual interest, with a
$1,000 par value. It matures in 15 years. The market's required
yield to maturity on a comparable-risk bond is 10 percent.
a. Calculate the value of the bond.
b. How does the value change if the yield to maturity on
a comparable-risk bond (i) increases to 14 percent or (ii)
decreases to 8 percent?
c. Explain the implications of your answers in part b as
they relate to...
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