What is the after-tax cost of debt for bonds

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1. BBG Corporation just issued 20-year, 10 percent coupon bonds, for which the firm incurred the flotation costs equal to 4.0 percent of the $1,000 face value. Interest is paid semi-annually and the firm is in the 30 percent corporate tax bracket. If investors are willing to pay $1,025 for each of the bonds, what is the after-tax cost of debt for bonds?

7.12 percent

8.24 percent

6.80 percent

9.72 percent

10.18 percent

2. You have $0 in your bank account today and have decided to start depositing every month for your after-retirement life. You just turned 20 years old and would like to able to withdraw $20,000 at the end of each month for 30 years after your 50th birthday. How much will you need to deposit into his account at the end of each month, starting one month from today and ending on his 50th birthday? You bank account earns 12 percent annual interest, compounding monthly, both before and after his retirement.

$336.55

$556.33

$423.51

$524.91

$285.27

Reference no: EM132062751

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