Pre-tax cost of debt capital, Finance Basics

Assignment Help:
Current cost of a bond: You know that the after-tax cost of debt capital for Bubbles Champagne is 7 percent. If the firm has only one issue of five-year maturity bonds outstanding, what is the current price of the bonds if the coupon rate on those bonds is 10 percent? Assume the bonds make semiannual coupon payments and the marginal tax rate is 30 percent.





(Omit the percent sign in your answer. Carry out all calculations to four decimal places and round your final answer to two decimal places, for example 7.80%.)

1. Pre-tax cost of debt capital = %.






(Omit the dollar sign in your answer. Carry out all calculations to four decimal places and round your final answer to nearest whole dollar.)

2. Current price of the bonds = $ .

Related Discussions:- Pre-tax cost of debt capital

Partnerships - types of business organisations, Partnerships - Types of B...

Partnerships - Types of Business Organisations Defination "The relationship, that exists with persons carrying on a business in common by a view of profit." Formati

Acceptance rule of irr, Acceptance Rule of IRR IRR will accept a ventu...

Acceptance Rule of IRR IRR will accept a venture if its IRR is higher than or equivalent to the minimum required rate of return such is usually the cost of finance also recogn

Partnership, Partnership Definition -Partnership may be defined as a re...

Partnership Definition -Partnership may be defined as a relationship between persons carrying on a business in common with a view of profits. In partnership business, two or mo

Application of discriminant analysis, Application of Discriminant Analysis ...

Application of Discriminant Analysis Application of Discriminant Analysis to the Selection of Applicants, Discriminative analysis is a statistical model such can be used to ac

The case of Apple, From the above case shareholders are very worried that a...

From the above case shareholders are very worried that apple is having too much cash,discuss six reasons why shareholders are so worried

What are the characteristics of an efficient market, What are the character...

What are the characteristics of an efficient market? The word market efficiency refers to the speed, ease, and cost of trading securities. In a well-organized market, securitie

Explain the operations of indian stock market, Explain the Operations of In...

Explain the Operations of Indian Stock Market. Meaning of Stock Exchange: Stock exchange means an organized market where securities issued by government organizations, compan

Similarities between preference share capital and debt, Similarities betwee...

Similarities between Preference Share Capital and Debt Similarities between Preference Share Capital and Debt are as follows: a) Both have fixed returns. b) Both do not

Liquidity preference theory, Liquidity Preference Theory This theory s...

Liquidity Preference Theory This theory states that short term bonds are extremely favorable than long term bonds for two (2) purposes. 1. Investors usually prefer short te

What is holding period return, What is Holding Period Return/Return ...

What is Holding Period Return/Return Holding period yield (HPY) measures the total return from an investment during a given time period in which asset is held by the investo

Write Your Message!

Captcha
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