Find out after tax cost of debt for firm

Assignment Help Finance Basics
Reference no: EM132740338

You are assessing the cost of debt of a highly profitable firm in the US to uses in the cost of capital. The firm has $1 billion in bank loans outstanding, carrying an interest rate of 4% and a remaining maturity 8 years, the loans were taken on a couple of years ago when interest rates were lower. The current risk-free rate is 5% AND YOU ANTICIPATE THAT YOUR DEFAULT SPREAD to borrow long term is 2%. What is the after tax cost of debt for this firm if the firm is taxed at the 2020 US marginal tax rate?

Reference no: EM132740338

Questions Cloud

Important role in corporate finance : A company should hold a level of inventory where the benefits of holding cash equal the cost
Cause major damage to the reputation of organization : Explain a minimum of 2 credentialing issues that can impact quality outcome and cause major damage to the reputation of an organization.
How many years are there until the bond? matures : The bond has a yield to maturity of 2.15?%. How many years are there until the bond? matures?
Find the terminal value calculation : What can you do in your terminal value calculation to account for the fact that the firm is doing better than the average firm?
Find out after tax cost of debt for firm : You are assessing the cost of debt of a highly profitable firm in the US to uses in the cost of capital. The firm has $1 billion in bank loans outstanding
Operations and resources plan : Describe any physical facilities you will need (retail, warehouse, etc.) Where will you locate these facilities?
Disadvantages of using real option analysis : What are the advantages and disadvantages of using Real Option Analysis as part of a project valuation?
Discuss qualitative considerations : MarsX Inc's. CEO. Mrs. Smith, is considering making an equity investment in Water co. She has heard that, based on the ownership % that MarsX
Explain the economic functions of money markets : Determine and explain the economic functions of money markets.

Reviews

Write a Review

Finance Basics Questions & Answers

  Developing nations for manufactured goods

The greater part of international trade consists of an exchange of raw materials from developing nations for manufactured goods from developed nations."

  Calculate and display cash from financing activities

Finally the firm paid dividends of $2.50 per share on 700,000 shares of outstanding common stock. Calculate and display the Cash from Financing Activities sec- tion of Lansing's statement of cash  flows.

  What is the standard deviation of the rate of return

A project has a 0.84 chance of doubling your investment in a year and a 0.16 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?

  Health insurance in america was forever changed by the

select one of the major u.s. government programs for funding of health care services and explain the scope and role of

  What is the future value of investment

Every day, for 200 days, Dirk deposits $50 in a bank account. If Dirk's bank pays a daily interest rate of 0.02% what is the future value of his investment?

  Research about the firms and the stock market

How are the stocks in your watch list performing since you first selected them? Speculate on reasons for each stock's performance and justify your analysis with research about the firms and the stock market in general.

  What inflation rate is expected after year 1

Assume that expectations theory holds and the real risk-free rate is r* = 3.25%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 2.25%, what inflation rate is expected after Year 1? Round your answer to two decimal places.

  Determine the projects cash flows

Describe the purpose of the report and provide a conclusion. An introduction and a conclusion are important because many busy individuals in the business environment may only read the first and the last paragraph - Determine the projects cash flows f..

  The company decided to shift its corporate headquarters

Logitech Best known as one of the world"s largest producers of computer mice, Logitech is in many ways the epitome of the modern global corporation.

  Wesson metals has an outstanding loan that calls for equal

wesson metals has an outstanding loan that calls for equal annual payments of 9768.46 over the life of the loan. the

  What is the npv of investing into the machine

When preparing capital budgeting analysis for a new project, Chris Johnson, a chief financial officer at BT Industries, faced a dilemma.

  What is the spread earned

If the forward rate is $0.6735/TL, how could the bank arbitrage using a sum of $9 million? What is the spread earned? (Do not round intermediate calculations).

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd