What is avicorp pre-tax cost of debt

Assignment Help Finance Basics
Reference no: EM133119938

Avicorp has a $14.7 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93% of par value.

a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return.

b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.

Reference no: EM133119938

Questions Cloud

Identify the actual rate of return of the portfolio : You are a graduate student from Holmes institute and started to invest in the securities market. Currently, you decided to move your super contribution to a new
Data case-ibm : You are a senior financial analyst with IBM in its capital budgeting division. IBM is considering expanding in Australia due to its positive business atmospher
What negative effects do debt and an unbalanced budget have : 1) Is the public debt (unbalanced budget) bad? Improve, adjust, or completely change your original answer by discussing the pros and cons of debt based on what
Allocation of partnership recourse liabilities : 1. On January 1 of year 1, A, B, and C formed ABC, a general partnership. The partnership agreement satisfies the primary test for economic effect.
What is avicorp pre-tax cost of debt : Avicorp has a $14.7 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the deb
Price the european call option : A stock price is currently $50. Over each of the next two 3-month periods it is expected to go up by 6% or down by 7%. The risk-free interest rate is 5% per ann
Plug the power cable into the back of the system : Configure a number of options and control the way Microsoft Edge handles new tabs and website browsing and security options
Feature of permanent life insurance : Cole has zero savings as most of his earnings are used to pay for all his monthly expenses. He has permanent life insurance and pays a $350 premium every month.
Describe common types of fringe benefits : Use the above link to categorize and provide brief description of types of fringe benefits. You most likely will need to add slides for this one.

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute the beta of an equally weighted portfolio

Compute the betas of AOL, Microsoft, and Intel with respect to the tangency portfolio found in exercise 5.2.

  What is the present value of all future earnings

What is the present value of all future earnings if the interest rate is 8%?? ?(Assume all cash flows occur at the end of the? year.)

  Explain the importance of financial markets and securities

Explain the importance of financial markets and securities to businesses.

  The feds impact on security prices

The Fed's Impact on Security Prices : - Explain how the Fed's monetary policy may indirectly affect the price of equity securities.

  How much would it be willing to lend the business owner

A small business owners visits her bank to ask for a loan. If bank is charging customers 9.50 percent APR, how much would it be willing to lend business owner

  You have 20000 to invest in a stock portfolio your choices

you have 20000 to invest in a stock portfolio. your choices are stock x with an expected return of 11 percent and stock

  What is carpet company wacc

The interest rate on this debt is 7%. Assume the corporate tax rate is 21%. What is carpet company's WACC?

  Someone making a scene in public

Write about a time you experienced someone making a scene in public, whether in a store, restaurant, medical office, etc.

  Organization understood the need for improvement

What actions would you take to ensure that employees in the organization understood the need for improvement and were able to cope with the accompanying changes

  Amount of goodwill or negative goodwill

Calculate the amount of goodwill or negative goodwill pertaining to this business combination:

  What is the equivalent annual compounding rate

FIN368 Financial Derivatives and Risk Management Assignment - An interest rate is quoted as 6% per annum, What is the equivalent annual compounding rate

  How is science used in technology

How is science used in technology?

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