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Before-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30-year mortgage. David will borrow $200,000 from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,199.10 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 30% tax bracket. a. What is the before-tax interest rate (per year) on David's loan? b. What is the after-tax interest rate that David is paying?
Assume that you just won the state lottery. Your prize can be taken either in the form of $40,000 at the end of each of the next 25 years (that is, $1,000,000 over 25 years) or as a single amount of $500,000 paid immediately. If you expect to be able..
A call option is currently selling for $4.40. It has a strike price of $50 and five months to maturity. What is the price of a put option with a $50 strike.
If the annual interest rate is 8%, how long would you have to wait before a $12,500 investment at least doubles in value?
If the weighted average cost of capital is 10% and Gonzales Corporation has cash of $100 million, debt of $300 million, and 100 million shares outstanding, what is Gonzales Corporation's expected current share price? A) $16.42 B) $13.85 C) $14.42 ..
The company needs a cash infusion of $1.5M, and it can issue equity or issue debt with an interest rate of 9%. Assume there are no corporate tax.
Distinguish between a term security and a demand security.
Judged against your WACC, how attractive is the Boeing 7E7 project?
1.one year ago you bought a stock for 36.48 a share. you recently received a dividend of 1.62 per share and sold the
Define and give an example of Profit Maximization. How important is this to INFOSYS LIMITED? Thoughts?
A borrower has a 30 year fully amortizing FRM, with a $300,000 balance, 4.5% rate. There is a 3% prepayment penalty on this loan if it is repaid before 5 years.
a 6.5 coupon bond with 25 years left to maturity is priced to offer a 4.5 yield to maturity. you believe that in three
Suppose a firm pays total dividends of $1,100,000 out of net income of $5.5 million. What would the firm's payout ratio be?
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