Determine the after-tax cost of debt

Assignment Help Financial Management

Reference no: EM131322840

Airborne Airlines Incorporated has 1000 par value Bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $88 and is currently selling for $950. Airborne is in a 40% tax bracket. The Firm wishes to know what the after-tax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar.

A. compute the yield to maturity on the old issue and use this as the year for the new issue.

B. make the appropriate tax adjustment to determine the after-tax cost of debt.

Reference no: EM131322840

Questions Cloud

How much does robert have to contribute to her pension fund : Using a financial calculator, how should we calculate the following questions. 1. What is the present value of $10,000 to be received each year for 20 years if the payments start immediately. Assume a discount rate of 5%. 2.Robert wants to withdraw $..

Calculate the analysis of the wet products of combustion : In the actual combustion of benzene in an engine the A/F ratio was 12/1.

Assignment-supply chain design and implementation : This assignment will help you develop an understanding about the life cycle of supply chains including the models that are aligned with it and the cost it bears. In addition, you will develop an awareness of the elements of the supply chain that s..

Explain how career aligns with your professional interests : Write a 700- to 1,050-word paper including the following: Summarize the article. Explain how this career aligns with your professional interests

Determine the after-tax cost of debt : Airborne Airlines Incorporated has 1000 par value Bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $88 and is currently selling for $950. Airborne is in a 40% tax bracket. compute the yield to maturity on the..

Independent variables involved in factorial design : How many independent variables are involved in a 3 x 3 factorial design? How many levels are there of each variable? How many experimental conditions are there? Draw the design.

Analyse the current state of international corporate : Critically analyse the current state of international corporate PC market to get a better sense for the environment to address the problem of Lenovo. Use the concept of Porter's Six Forces.

What is to be gained by looking closer at engineering : What contribution does engineering make that architecture can't make itself? What is to be gained by looking closer at engineering, according to Le Corbusier?

Describe reasons users are still frustrated with modern apps : Describe three (3) reasons users are still frustrated with modern applications.Suggest one (1) method for reducing the frustrations for each of the reasons you supplied in Question one (1).Describe methods for determining if user frustration is caus..

User Account

All Pages