P Check my workProblem 12-3 Calculating Cost of DebtSuspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 6 percent 3 years ago. The bond currentlysells for 92 percent of its face value. The company's tax rate is 35 percent.a. What is the pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)Pretax cost of debt%b. What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)Aftertax cost of debt%c. Which is more relevant, the pretax or the aftertax cost of debt?Aftertax cost of debtO Pretax cost of debt

Step 1: The calculation of the pretax and after-tax cost of debt AB1Face value$1,0002Current…

Answered: Check my work Problem 12-3 Calculating…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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You issued debt in the form of bonds, with a face value of $1,000, and have 12 years until maturity. The bonds have an annual coupon rate of 8.4%, which are paid semiannually. a. The current price is $1,115. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) b. The tax rate is 25%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) a. Pretax cost of debt b. Aftertax cost fo debt % %
Use the following to answer questions 4-7 (Round answers to the nearest dollar) The company issues 7.4%, 5-year bonds with a total face amount of $100,000. The market interest rate for bonds of similar risk and maturity is 7.6%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET (input your answers after you've completed the entire problem). 5. 7. will S expense? S payment? (rounded to nearest dollar). What is the issue price of the bond? (rounded to nearest dollar). When the company records the first interest payment, how much record company for interest. the (rounded to nearest dollar). What is the bond liability (carrying amount) after the first interest (rounded to nearest dollar). When the company records the second interest payment, how much will the company record for interest expense?
A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ funds
You are analyzing the cost of debt for a firm. You know that the firm's 14-year maturity, 8.6 percent coupon bonds are selling at a price of $832.00. The bonds pay interest semiannually. If these bonds are the only debt outstanding, answer the following questions. Problem 13.17 a1-a2(a1) Your answer is incorrect. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to O decimal places, e.g. 15%.) Current YTM for the bonds %
The company issues 10.0%, 10-year bonds with a total face amount of $1,000,000. The market interest rate for bonds of similar risk and maturity is 9.8%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET. 1. $ 2. $ 3. $ How much will be paid in interest each interest payment? (rounded to nearest dollar). What is the present value of the interest payments? (rounded to nearest dollar). What is the issue price of the bond?
Atom Endeavour Co. Issued $27 million face amount of 5.6% bonds when market Interest rates were 6.24% for bonds of similar risk and other characteristics. Required: a. How much Interest will be paid annually on these bonds? (Enter your answer in dollars, not millions of dollars, 1.e. 1,234,567.) Annual interest payment b. Were the bonds issued at a premium or discount? O Premium O Discount c. Will the annual Interest expense on these bonds be more than, equal to, or less than the amount of Interest paid each year? O Interest expense will be less than the Interest paid. O Interest expense will be more than the Interest paid. O Interest expense will be equal to the Interest paid.
Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to maturity that is quoted at 111.5 percent of face value. The issue makes semiannual payments and has an embedded cost of 8.4 percent annually. a. What is the company's pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the tax rate is 25 percent, what is the aftertax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Pretax cost of debt b. Aftertax cost fo debt % %
Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 13 years to maturity that is quoted at 106 percent of face value. The issue makes semiannual payments and has an embedded cost of 6.2 percent annually. • What is the company’s pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. • If the tax rate is 22 percent, what is the aftertax cost of debt?
3. Calculating Cost of Debt Shanken Corp. issued a 30-year, 5.9 percent semiannual bond three years ago. The bond currently sells for 106 percent of its face value. The company's tax rate is 22 percent. a. What is the pretax cost of debt? b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
A Collateralized Mortgage Obligation (CMO) principal balance is $1,000,000,000. The pass thru rate is 5.35%. The Weighted Average Coupon rate is 6.35%. The weighted Average Months is 350. The PSA is 90. 3-What is the month 1 CMO total cash flow from pass thru interest, scheduled principal and prepaid principal? 1-What is the total prepaid principal in month 30 of the Weighted Average Loan Age? 2- Within how many months from the creation of the CMÓ will tranche C principal be totally paid?
3. Assume you purchased a bond for $9,186. The bond pays $300 interest every six months. You sell the bond after 18 months for $10,000. Calculate the following: a. Income. b. Capital gain (or loss). c. Total return in dollars and as a percentage of the original investment. Review Only Click the icon to see the Worked Solution. a. The current income is $ (Round to the nearest dollar.) b. The capital gain (or loss) is $ (Enter a loss as a negative number and round to the nearest dollar.) c. The total return in dollars is $ (Round to the nearest dollar.) The total return as a percentage of the original investment is %. (Enter as a percentage and round to two decimal places.)
Atom Endeavour Co. issued $48 million face amount of 12.0% bonds when market interest rates were 13.38% for bonds of similar risk and other characteristics. Required: a. How much interest will be paid annually on these bonds? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Annual interest payment b. Were the bonds issued at a premium or discount? O Premium O Discount c. Will the annual interest expense on these bonds be more than, equal to, or less than the amount of interest paid each year? O Interest expense will be less than the interest paid. O Interest expense will be more than the interest paid. O Interest expense will be equal to the interest paid.

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