Using the cost-of-debt approximation formula, determine the pre-tax cost for a bond that sells at $ 925 par value and that pays a coupon of $ 85 for 20 years. The flotation costs are $ 5 per bond. You will have to show the counts. b. For the above case, calculate the cost of debt after taxes if the company's tax liability is 40%. You will have to show the counts.
Using the cost-of-debt approximation formula, determine the pre-tax cost for a bond that sells at $ 925 par value and that pays a coupon of $ 85 for 20 years. The flotation costs are $ 5 per bond. You will have to show the counts. b. For the above case, calculate the cost of debt after taxes if the company's tax liability is 40%. You will have to show the counts.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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a. Using the cost-of-debt approximation formula, determine the pre-tax cost for a bond that sells at $ 925 par value and that pays a coupon of $ 85 for 20 years. The flotation costs are $ 5 per bond. You will have to show the counts.
b. For the above case, calculate the cost of debt after taxes if the company's tax liability is 40%. You will have to show the counts.
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