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What is the after-tax cost of the bond issue flotation costs

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Reference no: EM132901098

Consider yourself the financial manager of Allied company. Allied Company plans to issue 25-year bonds with a face value of P10,000,000. Each bond has a par value of P2,500 and carriesS COupon rate of 9.5 percent However, the bond is expected to sell for 98 percent of par value. The flotation costs are estimated to be approximately P60 per bond and the firm s marginal tax rate is 34 percent. (ASsume that interest payments are made annually.)

Problem 1. Determine the net proceeds per bond

Problem 2. What is the before tax cost of this bond issue?

Problem 3. What is the after-tax cost of the bond issue's flotation costs?

Reference no: EM132901098

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