Essay
A company is going to issue a $1,000 par value bond that pays a 7% annual coupon.The company expects investors to pay $942 for the 20-year bond.The expected flotation cost per bond is $42,and the firm is in the 34% tax bracket.Compute the following:
a.the yield to maturity on the firm's bonds
b.the firm's after-tax cost of existing debt
c.the firm's after-tax cost of new debt
Correct Answer:
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a.YTM = 7.57%
b.After-tax cost...View Answer
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Correct Answer:
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b.After-tax cost...
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