Question
In: Finance
Avicorp has a $ 14.6 million debt issue outstanding, with a 5.9 % coupon rate. The...
Avicorp has a $ 14.6 million debt issue outstanding, with a 5.9 % coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93 % of par value.
a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return.
b. If Avicorp faces a 40 % tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.
Solutions
Expert Solution
AFTER TAX COST OF DEBT IS CALCULATED USING YTM AND NOT EFFECTIVE RATE
jeff jeffy answered 11 months agoRelated Solutions
Avicorp has a $12.8 million debt issue outstanding, with a 5.9% coupon rate. The debt has...
Avicorp has a $12.8 million debt issue outstanding, with a 5.9%
coupon rate. The debt has semi-annual coupons, the next coupon is
due in six months, and the debt matures in five years. It is
currently priced at 93% of par value. **Answer MUST be rounded to
FOUR decimal places**
a. What is Avicorp's pre-tax cost of debt? Note: Compute the
effective annual return. ROUND TO 4 DECIMAL PLACES
b. If Avicorp faces a 40% tax rate, what is its...
Avicorp has a $14.4 million debt issue outstanding, with a 5.9% coupon rate. The debt has...
Avicorp has a
$14.4
million debt issue outstanding, with a
5.9%
coupon rate. The debt has semi-annual coupons, the next coupon
is due in six months, and the debt matures in five years. It is
currently priced at
96%
of par value.
a. What is Avicorp's pre-tax cost of debt? Note: Compute the
effective annual return.
b. If Avicorp faces a
40%
tax rate, what is its after-tax cost of debt?
Note: Assume that the firm will always be able...
Avicorp has a $ 10.3 million debt issue outstanding, with a 6.1 % coupon rate. The...
Avicorp has a
$ 10.3
million debt issue outstanding, with a
6.1 %
coupon rate. The debt has semi-annual coupons, the next coupon
is due in six months, and the debt matures in five years. It is
currently priced at
94 %
of par value.
a. What is Avicorp's pre-tax cost of debt? Note: Compute the
effective annual return.
b. If Avicorp faces a
40 %
tax rate, what is its after-tax cost of debt?
Note: Assume that the firm...
Avicorp has a $12.3 million debt issue outstanding, with a 6.2% coupon rate. The debt has...
Avicorp has a $12.3 million debt issue outstanding, with a 6.2%
coupon rate. The debt has semi-annual coupons, the next coupon is
due in six months, and the debt matures in five years. It is
currently priced at 95% of par value.
a. What is Avicorp's pre-tax cost of debt? Note: Compute the
effective annual return.
b. If Avicorp faces a
40%
tax rate, what is its after-tax cost of debt?
Note: Assume that the firm will always be able...
Avicorp has a $13.9 million debt issue? outstanding, with a 6.2% coupon rate. The debt has?...
Avicorp has a $13.9 million debt issue? outstanding, with a 6.2%
coupon rate. The debt has? semi-annual coupons, the next coupon is
due in six? months, and the debt matures in five years. It is
currently priced at 93% of par value. a. What is? Avicorp's pre-tax
cost of? debt? Note: Compute the effective annual return. (Round to
4 decimal places) b. If Avicorp faces a 40% tax? rate, what is its?
after-tax cost of? debt?
4) PVE, Inc. has $15 million of debt outstanding with a coupon rate of 9%. Currently,...
4) PVE, Inc. has $15 million of debt outstanding with a coupon
rate of 9%. Currently, the yield to maturity on these bonds is 7%.
If the firm's tax rate is 35%, what is the after-tax cost of debt
to PVE?
A) 10.76%
B) 5.85%
C) 4.55%
D) 5.4%
5) The expected dividend is $2.50 for a share of stock priced at
$25. What is the cost of common equity if the long-term growth in
dividends is projected to be...
A) The coupon rate on a debt issue is 8%. If the yield to maturity on...
A) The coupon rate on a debt issue is 8%. If the yield to
maturity on the debt is 9%, what is the after-tax cost of debt in
the weighted average cost of capital if the firm's tax rate is
41%?
a. 3.96%
b. 5.31%
c. 7.46%
d. 6.66%
B) Expected cash dividends are $5.00, the dividend yield is 5%,
flotation costs are 8% of price, and the growth rate is 4%. Compute
the approximate cost of new common stock....
The company has a $300 million debt, with an annual coupon rate of 14% and a...
The company has a $300 million debt,
with an annual coupon rate of 14% and a remaining life of 10 years.
The indenture allows redemption at the call premium of 5%. Suppose
the firm can issue a new debt of $250 million with the coupon rate
of 11.5%. Flotation cost of the new bond issue is $2.75 million.
There is two months overlap, and Pygmalion’s tax rate is 36%, cost
of capital is 20% and the T-bill rate is 9%....
A firm has an outstanding debt with a coupon rate of 55%, seven years maturity, and...
A firm has an outstanding debt with a coupon rate of 55%, seven
years maturity, and a price of $1000 per $1000 face value. What
is the after-tax cost of debt if the marginal tax rate of the firm
is 30%?
Delta corporation has a bond issue outstanding with an annual coupon rate of 7% and 20...
Delta corporation has a bond issue outstanding with an annual
coupon rate of 7% and 20 years remaining until maturity. The par
value of the bond is $1,000. What is the current value of the bond
if present market conditions justify a 14% required rate of
return?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- UNIX ONLY -- DIFFICULT LAB ASSIGNMENT This is an extremely difficult subject for me. Could you...
- Do you know why your credit card can be refused even though you are profitable?
- The Following Java expression: S/10 * 10 + 10 – S = C Show that this...
- Year Cash Flow 0 −$9,700 1 5,800 2 2,500 3 3,400 &nb
- In a two – story building, an exterior column is to be designed for a service...
- Explain the use of neural networking modeling in predictive analytics. Discuss a real-life example of where...
- Boarder line and antisocial disorder are perhaps the most research personality disorder.What are the most common...
ADVERTISEMENT