ananth10
Mar 3, 2014, 07:09 AM
Expert Certising Inc. can issue a 25-year debt security that pays an annual coupon payment of $90. The bond, which has a face value of $1,000, is trading at par. Based on this information, determine Expert Certising Inc.'s after-tax cost of debt if the combined marginal corporate tax rate is 35%.
a) 5.5575%
b) 5.2650%
c) 5.8500%
d) 6.4350%
Expert Certising Inc.'s CFO has pointed out that it will incur a flotation cost of 2% when issuing the bonds. Remember that the flotation costs will be __________(added/subtracted) from the amount the firm will receive from issuing its new bonds. Determine the company's after-tax cost of debt when it takes the flotation cost into account.
a) 7.1815%
b) 5.3861%
c) 6.2838%
d) 5.9846%
a) 5.5575%
b) 5.2650%
c) 5.8500%
d) 6.4350%
Expert Certising Inc.'s CFO has pointed out that it will incur a flotation cost of 2% when issuing the bonds. Remember that the flotation costs will be __________(added/subtracted) from the amount the firm will receive from issuing its new bonds. Determine the company's after-tax cost of debt when it takes the flotation cost into account.
a) 7.1815%
b) 5.3861%
c) 6.2838%
d) 5.9846%