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

Head office and branch or subsidiary, Head Office and Branch or Subsidiary ...

Head Office and Branch or Subsidiary MNC has diverse operations set up in dissimilar geographical locations. The HQ acts like the principal and the subsidiary like an agent he

Present value of an annuity - dcf technique, Present Value of an Annuity - ...

Present Value of an Annuity - DCF Technique An individual investor may not necessarily acquire a lump sum after several years however rather obtain a constant periodic amount

Find the policy value after the policy is issued, Question 1: Consider ...

Question 1: Consider a 5-year $10,000 endowment assurance issued to a select life aged 30 under the following bonus schemes:- (a) Simple reversionary bonuses of 5% p.a., 6%i

What are the types of orders, What are the Types of orders (i) Spot ...

What are the Types of orders (i) Spot Delivery: Spot delivery means delivery and payment on the same day as date of the contract or on the next day. (ii) Hand Delivery:

Reasons for different interest rate, Reasons for Different Interest Rate ...

Reasons for Different Interest Rate Interest rates may differ in different market and market segment since: i) Size of the loan: Deposits above specific amounts into the

Tax differential theory, Tax Differential Theory Advanced via Lichtenb...

Tax Differential Theory Advanced via Lichtenberger and Ramaswamy in 1979.They argued that tax rate on dividends is higher quite than tax rate on capital gains. Thus, a firm th

Determine the npv of a company, Example of NPV Value A company is fac...

Example of NPV Value A company is faced along with the following five (5) investment opportunities as:   Cost NPV P.I = Total P.v

Calculate the yield to maturity, Suppose the current yield curve is as foll...

Suppose the current yield curve is as follows: (a) Calculate the current market prices of two bonds with the following annual cash flows: Bond A: A coupon of $60 is due

Oogenesis - gametogenesis, Oogenesis - Gametogenesis The maturing proc...

Oogenesis - Gametogenesis The maturing procedure in oogenesis leading to the formation of ovum begins before birth but is not completed until after puberty. The primary oocyte

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