The pretax cost of debt

Assignment Help Financial Management
Reference no: EM131595806

The pretax cost of debt:

a. Is based on the current yield to maturity of the firm's outstanding bonds.

b. Is equal to the coupon rate on the latest bonds issued by a firm.

c. Is equivalent to the average current yield on all of a firm's outstanding bonds.

d. Is based on the original yield to maturity on the latest bonds issued by a firm.

e. Has to be estimated as it cannot be directly observed in the market.

Reference no: EM131595806

Questions Cloud

Calculate operating cash flow : calculate operating cash flow. Net sales =$4200, cost of goods sold= $2650, operating expenses= $580, depreciation =$610,
What is the future value of the cash flows : what is the most this investment is worth today? What is the future value of the cash flows?
The operating income view or the neo-classical approach : the operating income view or the neo-classical approach in regards to the relationship between the WACC and the value of the firm.
Calculate value of each bond-relative rate sensitivity : Mr. Brown wants to purchase one of three bonds. Calculate the value of each bond and their relative rate sensitivity from a +/- 50 BPS rate change.
The pretax cost of debt : The pretax cost of debt:
Cost of retained earnings in the cost of capital calculation : Why is a cost assigned to the cost of retained earnings in the cost of capital calculation?
Calculation of the cost of capital-after-tax cost of debt : In the calculation of the cost of capital, the after-tax cost of debt is used but the cost of equity in the calculation is not adjusted for tax. Why?
Relationship between the wacc and the value of the firm : Explain the net income view or the traditional approach in regards to the relationship between the WACC and the value of the firm.
Minimum annual rate of his investment to achieve target : He thinks that he will need P500.000 for his wedding budget. What is the minimum annual rate of his investment to achieve this target?

Reviews

Write a Review

Financial Management Questions & Answers

  A leveraged merger is between unrelated firms

In a stock swap, the acquiring firm issues shares of stock in order to pay for the acquistion. a leveraged merger is between unrelated firms. a leveraged buyout involves creating a new company out of part of your company and then selling shares of th..

  What is the pretax required return on stock

The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 4 percent. Suppose the capital gains tax rate i..

  Consists of multiple divisions with different risks

Estee Lauder is a company that consists of multiple divisions with different risks. When evaluating managerial performance in each division, should the Board of Directors apply the firm-wide cost of capital, or should divisional costs of capital be c..

  Company is purchasing and installing a new machine

A company is purchasing and installing a new machine. What is your calculated ERR? Show all your work including your cash flow diagram.

  What is the present value of CD

What is the present value of CD with 4% annual interest that matures in 1 year with the value of $3000? What is the future value? What factor would determine wh

  Literature contain a character who intentionally deceives

Many works of literature contain a character who intentionally deceives others.

  What is money supply growth rate

Consider country that has inflation of 10 percent per year. Real output growth is 2 percent. If velocity of money is constant, what is money supply growth rate.

  Uses the proceeds to repurchase shares

Meyer & Co. expects its EBIT to be $91,000 every year forever. What will the value be if the company borrows $136,000 and uses the proceeds to repurchase shares

  Annual return net of expenses

Assume a 10% annual return net of expenses before the 12b-1 fee is applied. How do you calculate $100 for investment?

  Determine the size of the annual deposits

Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be ab..

  Establishment of a false claim under the false claims act

What are five elements pertaining to the establishment of a false claim under the False Claims Act? HIPAA privacy standards were designed to accomplish what three broad objectives? Explain each. Stark II laws prohibit physician referrals to entities ..

  What kind of deal did running back scamper off with

In 2015, a running back signed a contract worth $60.4 million. The contract called for $11.5 million immediately and a salary of $2.8 million in 2015, $8.1 million in 2016, $11.5 million in 2017, $8.7 million in 2018 and 2019, and $9.1 million in 202..

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