What is before-tax cost of debt for olympic

Assignment Help Financial Management
Reference no: EM131913616

Olympic Sports has two issues of debt outstanding. One is an 8% coupon bond with a face value of $27 million, a maturity of 10 years, and a yield to maturity of 9%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with coupons also paid annually, and a coupon rate of 9%. The face value of the issue is $32 million, and the issue sells for 94% of par value. The firm's tax rate is 40%.

a. What is the before-tax cost of debt for Olympic? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. What is Olympic's after-tax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Reference no: EM131913616

Questions Cloud

Briefly explain the three generic strategies : Briefly explain what the concept of a Joint Venture -why are these so apparently ineffective and short-termed? If you disagree, explain why.
What is the present value of salvage value of old machine : Refer to Feed the Hungry Foundation. What is the present value of salvage value of the old machine if it is replaced now
How does the technique reinforce the style of the work : How does the technique/material reinforce the style of the work? What technical problems might the artist have faced in creating this object?
What could he have improved about himself and why : How did Steve Jobs (CEO of Apple Computer) utilize the practice of Envisioning the Future? What did he do well?
What is before-tax cost of debt for olympic : What is the before-tax cost of debt for Olympic? What is Olympic's after-tax cost of debt?
Why might attempts to fine-tune the economy be ineffective : When the Federal Reserve lowers the real interest rate, what happens to the output gap and to the inflation rate?
What amount should avalon report as cost of goods sold : Increase in accounts payable related to inventory $50000. What amount should Avalon report as cost of goods sold for 2011
How well has the firm performed and why : How much risk is inherent in the firm's existing capital structure? How successfully does the firm compete in its industry?
Number of swap operations performed in the worse case : (i) What is the number of swap operations performed in the worse case?

Reviews

Write a Review

Financial Management Questions & Answers

  Financial statements must be prepared a certain way

In the accounting world, financial statements must be prepared a certain way. Why is it important for financial statements to be prepared a certain way?

  The risk free and the market risk premium

The risk free (RF) rate is 6 percent and the market risk premium (RM-RF) is also 6 percent. What is the stocks' beta?

  Calculate the new bond price

Use duration to estimate the new price of the bond. Calculate the new bond price.

  Prefer the payback period method

A comparison of the survey results between the healthcare group and the non-healthcare group reveals major differences in their capital budgeting practices. Why do healthcare firms (especially, not-for-profit ones) continue to prefer the payback peri..

  What is its profit or loss on the entire futures position

When the hedge ends the spot price of crude is $69.25 and that of gasoline is $250 per barrel. What is its profit or loss on the entire futures position?

  Continue growing at this rate for foreseeable future

Dividends have been recently growing at an 8 % annual rate and are expected to continue growing at this rate for the foreseeable future.

  Interest rate determination

(Interest rate determination?) If 10-year Treasury bond rate is 4.7 % the inflation premium is 1.5 %? and maturity-risk premium on? 10-year Treasury bonds

  Compute companies accounting net income

Use following to compute companies accounting net income:

  The companys debt ratio be if the equipment were leased

Reynolds Construction needs a piece of equipment that costs $200. Reynolds can either lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. Would the compan..

  What is present value of the interest tax shield

What is the present value of the interest tax shield, assuming its risk is the same as the loan? What is the present value of the interest tax shield in case?

  Growth rate in dividends is expected to be a constant

Bayou Okra Farms just paid a dividend of $3.65 on its stock. The growth rate in dividends is expected to be a constant 7 percent per year indefinitely.

  According to the expectations hypothesis,

According to the expectations hypothesis, what is the market’s expectation of the one-year interest rate three years from now?

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