What is the post-tax cost of debt for the newly-issued bonds

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Reference no: EM132020193

1. Assume you purchased a stock for $40.00 last year. Over the year, its price increased to $42.00 and it paid a dividend of $1.50. What is the total return? Capital gain return and income return?

2. XYZ Company is undergoing a major expansion. The expansion will be financed by issuing new 16-year, $1,000 par, 8% annual coupon bonds. The market price of the bonds is $1,020 each. Flotation expense on the new bonds will be $60 per bond. The marginal tax rate is 35%. What is the post-tax cost of debt for the newly-issued bonds?

Reference no: EM132020193

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