if before tax cost of debt rd = 0.12, tax rate (T)=35%, what is the after...

if before tax cost of debt rd = 0.12, tax rate (T)=35%, what is the after tax cost of debt?

Expert Solution

jeff jeffy answered 2 years ago

A. The (before-tax cost of debt/after-tax cost of debt) is the interest rate that a firm...

A. The (before-tax cost of debt/after-tax cost of debt) is the interest rate that a firm pays on any new debt financing. B. Perpetualcold Refrigeration Company (PRC) can borrow funds at an interest rate of 11.10% for a period of four years. Its marginal federal-plus-state tax rate is 45%. PRC’s after-tax cost of debt is (6.11%/7.03%/5.80%/6.72%) (rounded to two decimal places). C. At the present time, Perpetualcold Refrigeration Company (PRC) has 10-year noncallable bonds with a face value of $1,000...

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by . Perpetualcold...

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by . Perpetualcold Refrigeration Company (PRC) can borrow funds at an interest rate of 11.10% for a period of four years. Its marginal federal-plus-state tax rate is 25%. PRC’s after-tax cost of debt is (rounded to two decimal places). At the present time, Perpetualcold Refrigeration Company (PRC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price...

1. Do we focus on after-tax cost of debt or before-tax cost of debt? Do we...

1. Do we focus on after-tax cost of debt or before-tax cost of debt? Do we focus on new costs of debt or historical costs of debt? Why? 2. How to adjust component cost of debt, preferred stock, common stock for flotation costs? 3. When we calculate WACC, do we consider such current liabilities as accounts payable, accruals, and deferred taxes as sources of funding? Why?

Before-tax cost of debt and? after-tax cost of debt??Personal Finance Problem???David Abbot is interested in purchasing...

Before-tax cost of debt and? after-tax cost of debt??Personal Finance Problem???David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the? security: Sony Bond Par value ? $1000 Coupon interest rate Corporate tax rate 5.5?% 35?% Cost????????? Years to maturity 10?? ?$910 Answer the following? questions: a.??Calculate the ?before-tax cost of the Sony bond using the? bond's yield to maturity? (YTM). b.??Calculate the ?after-tax cost of the Sony bond given the corporate...

What is the WACC for a firm with equal amounts of debt and equity financing, a 17% before-tax company cost of capital, a 35% tax rate, and a 10% coupon rate on its debt that is selling at par value?

What is the WACC for a firm with equal amounts of debt and equity financing, a 17% before-tax company cost of capital, a 35% tax rate, and a 10% coupon rate on its debt that is selling at par value? A. 10.40% B. 14.25% C. 15.25% D. 16.00%

What is the WACC for a firm with equal amounts of debt and equity financing, a 16% before-tax company cost of capital, a 35% tax rate, and a 10% coupon rate on its debt that is selling at par value?

What is the WACC for a firm with equal amounts of debt and equity financing, a 16% before-tax company cost of capital, a 35% tax rate, and a 10% coupon rate on its debt that is selling at par value? A. 10.40% B. 14.25% C. 15.13% D. 16.00%

Given following information, what is the companys ROE? Debt 5: 60% Tax Rate: 35% Earnings before...

Given following information, what is the companys ROE? Debt 5: 60% Tax Rate: 35% Earnings before interest and tax: $20,000 Interest Rate: 8% Assets: $160,000 A. 12.098% B. 12.153% C. 13.116% D. 13.867%

How would each of the following scenarios affect a firms cost of debt , Rd (1-T)...

How would each of the following scenarios affect a firms cost of debt , Rd (1-T) , its cost of equity, Rs, and its WACC. Indicate with a (+), a minus (-), or a zero (0) whether the factor would raise , lower, or have indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. Be prepared to justify your answer but...

If the tax rate is 40 percent, compute the before-tax real interest rate and the after-tax...

If the tax rate is 40 percent, compute the before-tax real interest rate and the after-tax real interest rate. (answer in percentages. If whole percentages, do not need decimals. If have decimals, round to nearest hundredth of percent) Show all steps clearly assume multiplying percentages by $100 before-tax real interest rate = nominal interest rate - inflation rate reduction in nominal interest = nominal interest rate multiplied by tax rate after-tax nominal interest rate = nominal interest rate - reduction...

Find the cost of debt (rd), and the after-tax cost of debt for each of the...

Find the cost of debt (rd), and the after-tax cost of debt for each of the following bonds: Bond Par Value Coupon Rate Maturity Current Value Tax Rate A 1,000 10% 30 Years 1,455 40% B 1,000 12% 13 Years 954 35% C 1,000 8% 5 Years 875 45% Bond A, Cost of Debt (rd) : Bond A, After Tax Cost of Debt: Bond B, Cost of Debt (rd): Bond B, After Tax Cost of Debt: Bond C, Cost...

Question