What is the after tax cost of this bond

Assignment Help Financial Accounting
Reference no: EM132928614

Question -

a) A bond has a face value of $1,000. It has a maturity of 20 years and a coupon rate of 9%. The bond pays interest semiannually. The yield on the bond is 10%. Assuming a 30% tax rate, what is the after tax cost of this bond, for purposes of calculating the company's WACC?

b) Calculate the WACC for the following data: A company raised $100,000,000. $50,000,000 came from the sale of bonds which have a current yield of 8%. $25,000,000 came from the sale of common stock which has a cost equal to 14%. The final $25,000,000 came from the sale of preferred stock which has a cost equal to 10%. The company's tax rate is 50%.

Reference no: EM132928614

Questions Cloud

What you understand by earnings per share : Briefly explain what you understand by Earnings per share (EPS). How is EPS calculated and why it is important for investors to gauge the value of a share
Ensemble methods : Describe how linear regression models are different from nonlinear models.
Enterprise security strategy plan : Describe the company that will be the subject of your Enterprise Security Strategy Plan.
Prepare Xu adjusting entry on December : Xu Appliances sold customer Mitch Ellis a three-year extended warranty for $255 with the purchase of his new appliances. Prepare Xu adjusting entry on December
What is the after tax cost of this bond : A bond has a face value of $1,000. Assuming a 30% tax rate, what is the after tax cost of this bond, for purposes of calculating the company's WACC
Introduction to machine learning : Using an example summarize the basic requirements and process of machine learning.
Support vector machine : Describe a kernel function in SVM. Also describe the process of feature engineering and boundary creation in SVM.
Sochi olympics-what is the cost of national prestige : Sochi Olympics-What's the Cost of National Prestige?
Define extended service set : Define an extended service set. How is the concept of an association related to that of mobility? What is the difference between TKIP and CCMP?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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