What is your best estimate of the after-tax cost of debt

Assignment Help Financial Management
Reference no: EM131920750

Pearce’s Cricket Farm issued a 25-year, 12 percent semiannual bond 3 years ago. The bond currently sells for 94 percent of its face value. The company’s tax rate is 38 percent. Suppose the book value of the debt issue is $40 million. In addition, the company has a second debt issue on the market, a zero coupon bond annually with 14 years left to maturity; the book value of this issue is $45 million and the bonds sell for 53 percent of par. What is the company’s total book value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total book value $ What is the company’s total market value of debt? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) Total market value $ What is your best estimate of the after-tax cost of debt? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Reference no: EM131920750

Questions Cloud

Equivalent-maturity government of canada debt : Currently the credit spread for BBB is 140 basis points over equivalent-maturity Government of Canada debt.
What was the firm cash flow to creditors : What was the firm’s cash flow to creditors during 2015?
What is BCCI cost of equity capital and its WACC : What is BCCI's cost of equity capital and its WACC? Buildwell's tax rate is 35 percent.
What is the implied one year forward rate : The coupon on a 2-year treasury bond is 5.8%. What is the implied 1 year forward rate?
What is your best estimate of the after-tax cost of debt : What is your best estimate of the after-tax cost of debt? What is the company’s total market value of debt?
What is your payment if six-month libor : Three months from today you plan to borrow $1.8 Billion for 6 months at LIBOR. what is your payment if the 6-month LIBOR is .28% in two months?
The asset that provides you the lowest portfolio risk : Assume equal weights in Asset A and the 2nd asset you choose. You are to choose the asset that provides you the lowest portfolio risk. Which asset do you choose
Calculate NPV and IRR without mitigation : An electric utility is considering a new power plant in northern Arizona. Calculate the NPV and IRR without mitigation.
Debt–equity ratio-what is the initial cost of the plant : What is the initial cost of the plant if the company raises all equity externally?

Reviews

Write a Review

Financial Management Questions & Answers

  Bond with warrants to compare with cost of straight debt

How would you expect the cost of the bond with warrants to compare with the cost of straight debt?

  Compute component and percentage changes

Perplexed by the declining profit margin and the rate of growth of EASY's net income, Melissa Hampton pressed the company management for more information.

  Either by direct dividend payment or stock repurchase

A company's stock is currently selling for $20 per share. Suppose you hold 800 of this company's shares that you bought last year at $15.60 a share. The company intends to pay out to its shareholders $1 per share, either by direct dividend payment or..

  How much can janet save annually by using the better plan

How much can Janet save annually by using the better plan?

  Considering new project to produce solar water heaters

Hula Enterprises is considering a new project to produce solar water heaters. the debt capacity is 50 cents for every dollar of asset value.

  What is the profit generated by this strategy

what is the profit generated by this strategy if the fund manager view of market comes true accurately by august 2016 and she unwinds her trades.

  Effective annual interest rate of these discount loans

Faircross Farms harvests its crops four times annually and receives payment for its crop 90 days after it is picked and shipped. However, planting, irrigating, and harvesting must be done on a nearly continual schedule. What is the effective annual i..

  Determine the incremental after-tax operating cash flows

Burton, a manufacturer of snowboards, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. The proposed machine will cost $120,000 and have installation costs of$15,000. lt wil..

  About the operations of hancock company

The following information about the operations of Hancock Company is available. Find the NPV of its operating cycle. What is the new NPV if Hancock can delay the payments by 2 days and make the collections 2 days earlier? By comparing the answers to ..

  What is the gain or loss realized on the sale

Bob sells a stock investment for $45,000 cash, and the purchaser assumes Bob's $32,500 debt on the investment. The basis of Bob's stock investment is $55,000. What is the gain or loss realized on the sale?

  What is the required rate of return on tangshan stock

Tangshan China's stock is currently selling for $160.00 per share and the firm's dividends are expected to grow at 5 percent indefinitely. Assuming Tangshan? China's most recent dividend was $5.50, what is the required rate of return on Tangshan's st..

  Use dividend-discount model to estimate its value per share

use the? dividend-discount model to estimate its value per share at the end of 2009. The price per share is $---------- . (Round to the nearest? cent.)

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