What is the firms cost of debt financing

Assignment Help Financial Management

Reference no: EM131067068

St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 9.5 percent and will be sold at a market price of $980. Flotation costs will amount to 4 percent of market value. The bonds will mature in 15 years and coupon payments will be semi-annual. St. Thomas' marginal tax rate is 35%. What is the firm's cost of debt financing?

Reference no: EM131067068

Questions Cloud

Standard deviation of diversified portfolio of common stocks : What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?

Calculate the capital gain yield : Suppose that you have just purchased a share of stock for $22.50. The most recent dividend was $1.50 and dividends are expected to grow at a rate of 5% indefinitely. Calculate the capital gain yield.

What is the best estimate of stock current market value : ABC just paid a dividend of D0 = $4.5. Analysts expect the company's dividend to grow by 34% this year, by 28% in Year 2, and at a constant rate of 7% in Year 3 and thereafter. The required return on this stock is 17%. What is the best estimate of..

What is effective cost. sales based on year : Grunewald Industries sells on terms of 2/10, net 40. Gross salse last year were $4,562,500 and accounts recivable averaged $437,500. Half of customers paid on the 10th day and took discount. Another half on 40th day. What is effective cost. Sales bas..

What is the firms cost of debt financing : St. Thomas Company is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 9.5 percent and will be sold at a market price of $980. Flotation costs will amount to 4 percent of market value. The bonds will mature in 15 years a..

What profit margin must the firm achieve : Dante Co. wishes to maintain a growth rate of 11.6 percent a year, a debt–equity ratio of 1.6, and a dividend payout ratio of 25 percent. The ratio of total assets to sales is constant at .88. What profit margin must the firm achieve?

What is the annual worth and internal rate of return : Will visits Barbados so often that he decides to buy a shop there for $8,000. He plans to keep a residence on the second floor and rent the first floor shop for $60 per month. Besides earning rent, he figures he will also save $1000 per year in lodgi..

Isaac of girona : Caroline Roe writes about Isaac of Girona, a Jewish physician in 14th century Catalonia. What unusual physical attribute does Isaac have, which must make detecting more difficult?

Preceding summary for a plot : A cleric, who is also pursuing the carpenter's wife, climbs up to her window to woo her, the boarder farts in the cleric's face, and then the cleric burns the boarder's bottom with a red hot poker. Which of "The Canterbury Tales" has the preceding..

User Account

All Pages