Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The tax rate is 40%. If the flotation cost is 2% of the issue proceeds, what is the after-tax cost of debt?
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A: Introduction : The debt are to be paid with interest and payment on the maturity.
Suppose a company will issue new 20-year debt with a par value of $1,000 and a
coupon rate of 9%, paid annually. The tax rate is 40%. If the flotation cost is 2% of
the issue proceeds, what is the after-tax cost of debt?
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- Suppose that $100,000 is borrowed at 8 percent and is to be repaid in three equal annual installments. Prepare a debt amortization table and show that the net present value of the after-tax cash flows of the debt is zero using the after-tax cost of debt as the discount rate. The tax rate is 40 percent.Your company pays 8.76% on short-term debt, 6.31% on long-term debt, and 8.66% on any additional long-term debt it raises through its AFN program. If your company currently has $51.50 million in short-term debt, $550.00 million in long-term debt, and plans to raise $100.00 million AFN, what will the total interest expense be for the year? Note: your answer should be in millions of dollars.Please include calculations: A $100,000 loan can be obtained at a 10 percent rate with monthly payments over a 15-year term. a. What is the after-tax effective interest rate on the loan, assuming the borrower is in a 30 percent tax bracket and the loan is held only three years? Assume that the benefit of interest deductions for tax purposes occurs at the same time payments are made. b. Calculate the after-tax effective cost for the above loan, assuming that 5 points are charged and that the points are tax deductible at the time they are paid. c. How does the after-tax cost in part (b) compare with the pretax effective cost of the loan?
- Suppose a firm which wants to purchase a piece of machinery borrows $10,000 to be repaid inive equal payments at the end of each of the next 5 years, and the interest rate is 15%, calculatehe annual payments associated with the repayment of this debt. Please finish the table below.lease round to 2 decimal places.1. To calculate the after-tax cost of debt, multiply the before-tax cost of debt by ______. 2. Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of six years. Its marginal federal-plus-state tax rate is 25%. WGC’s after-tax cost of debt is ________. (rounded to two decimal places). 3. At the present time, Western Gas & Electric Company (WGC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,555.38 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 4.73% 4.11% 4.93% 3.29%A $100,000 loan can be obtained at a 10 percent rate with monthly payments over a 15-year term.a. What is the after-tax effective interest rate on the loan, assuming the borrower is in a 30 percent tax bracket and the loan is held only three years? Assume that the benefit of interest deductions for tax purposes occurs at the same time payments are made.b. Calculate the after-tax effective cost for the above loan, assuming 5 points are charged and that the points are tax-deductible at the time they are paid.c. How does the after-tax cost in part (b) compare with the pretax effective cost of the loan?
- How long will you take to pay a debt of $750,000 using annual interest rate of 10% and annual benefit of $150,000?Your company is planning to borrow $1,000,000 on a 5-year, 15%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal?To calculate the after-tax cost of debt, multiply the before-tax cost of debt by . Andalusian Limited (AL) can borrow funds at an interest rate of 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 25%. AL’s after-tax cost of debt is (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,229.24 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 3.20% 3.56% 4.27% 4.09%
- DBF borrows $3.29B by issuing 12-year bonds. ECB's cost of debt is 6.07%, so it will need to pay interest each year for the next 12 years, and then repay the principal $3.29B in year 12. ECB's marginal tax rate will remain 42.99% throughout this period. By how much does the interest tax shield increase the value of DBF? NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.000, etc.To calculate the after - tax cost of debt, multiply the before - tax cost of debt by(1-T). Water and Power Company (WPC) can borrow funds at an interest rate of 7.30% for a period of four years. Its marginal federal- plus - state tax rate is 25% WPC's after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,438.04 per bond, carry a coupon rate of 14%, and distribute annual coupon payments. The company incurs a federal-plus- state tax rate of 25%. If WPC wants to issue new debt, what would be a reasonable estimate for its after - tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 3.72% 3.57% 3.10% 2.48%To calculate the after-tax cost of debt, multiply the before-tax cost of debt by(1 – T) . Andalusian Limited (AL) can borrow funds at an interest rate of 9.70% for a period of six years. Its marginal federal-plus-state tax rate is 25%. AL’s after-tax cost of debt is 7.28% (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 7.84% 5.88% 6.53% 5.22%