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adaneri1234
22.07.2019 •
Business
Acorporate bond has a face value of $1,000 and a coupon rate of 6.5%. the bond matures in 10 years and has a current market price of $985. if the corporation sells more bonds it will incur flotation costs of $36 per bond. if the corporate tax rate is 34%, what is the after-tax cost of debt capital? a)5.71%b)5.45%c)5.18%d)4.78%
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Ответ:
After-tax cost of debt capital = 4.78%
Explanation:
Cost of debt (After-tax):
Where,
F = Floatation cost
Net proceeds = Bond face value ± Premium or Discount
Net proceeds: $ 1000 - $ 15 = $ 985
Flotation cost = $ 36
Tax rate 34% or 0.34
Hence, after tax cost of debt =
(1 - 0.34)
= 4.778 % (approx.)
i.e. 4.78%
Ответ:
hey Anna
Explanation:
Hey Anna, its braydon