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    ananth10's Avatar
    ananth10 Posts: 3, Reputation: 1
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    #1

    Mar 3, 2014, 07:09 AM
    Finance help: Need help asap
    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%
    smoothy's Avatar
    smoothy Posts: 25,490, Reputation: 2853
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    #2

    Mar 3, 2014, 07:11 AM
    WHat do you think the answers are and why...
    ananth10's Avatar
    ananth10 Posts: 3, Reputation: 1
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    #3

    Mar 3, 2014, 07:13 AM
    I don't know how to approach the question.
    ananth10's Avatar
    ananth10 Posts: 3, Reputation: 1
    New Member
    		  
    #4

    Mar 3, 2014, 07:14 AM
    Quote Originally Posted by smoothy View Post
    WHat do you think the answers are and why...
    I don't know how to approach the question.
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