Compute for the approximate after tax-cost of debt.
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Part 1:
The company has a P1,000 par
subpart :
the company's common stock has a beta, β, of 1.2. The risk-free rate is 6%, and the market return is 11%. With the following given, the corporation estimates the cost of common stock equity, rs, to be? (Round off to two decimal places between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%)
Step by step
Solved in 2 steps
- CC Company's 5-year bonds are selling at P820. The bonds face amount is P1,000 and pays an annual interest rate of 6%. CC's tax rate is at 30%. What is CC's cost of debt? Topic: Cost of Capital Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 7.5 percent annual interest and matures in 15 years. Investors are willing to pay $949 for the bond and Temple faces a tax rate of 32 percent. What is Temple's after-tax cost of debt on the bond? Question content area bottom Part 1 The after-tax cost of debt is_____%A) You invest OMR 900 in a bond which gives 9% interest over a period of 2 years, the compounding is done quarterly. How much will be the value of the investment? Select one: a. 1053.24 b. 1254.74 c. 1075.34 d. 753.24 B) Which of the statements are not correct Select one: a. Profits refers to earnings before Interest and Taxes b. Investment decisions relate to pattern of financing c. Dividend pay out ratio refers to what proportion is paid to shareholders d. Borrowed funds are relatively cheaper than shareholders’ funds
- The following information applies to this question: Johnson Corporation plans to obtain financing with a $1,000,000 bond issue that has a term of 10 years. Payments wilI be made semi-annually. if the bond (payment) rate is stated at 7%, and the bonds call for semi-annual payments, what is the amount of those payments? O a. $350,000 O b. $70,000 OC. $35,000 d. $700,000DIRECTIONS: Read and analyze the following problems and supply what is required and support it with necessary computations. 1. A company plans to issue a 25-year bond with a 12.5% interest rate, issued at a face value of P1, 000. The company is subject a 30% tax rate and expects a return on investment at 8%. Compute for the cost of debt issuance.The existing 10 year, 6% bonds are trading in the market at $900. The corporate tax rate is 32% After-tax interest rate = YTM (1-T) 2a. Calculate the interest rate for the new bonds. 2b.What is the after-tax interest rate for the new bonds?
- Your answer is partially correct. Swifty Ltd. issued a $1,184,000, 10-year bond dated January 1, 2023. The bond was sold to yield 12% effective interest. The bond paid 10% interest on January 1 and July 1 each year. The company's year-end was December 31, and Swifty followed IFRS. Using 1. factor Tables 2. a financial calculator, or 3. Excel function PV, calculate the amount received for the bond, and any discount or premium on the bond.es Jiminy's Cricket Farm issued a 30-year, 5.7 percent semiannual bond 3 years ago. The bond currently sells for 111 percent of its face value. The company's tax rate is 25 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt % b. Aftertax cost of debt %A company has issued a $20,000, 10 year bond. Each bond pays interest quarterly of 2%. Determine the amount a purchaser has to pay for the bond, if it yield a 12% compounded quarterly. a. PW = $32,000 b. PW = $31, 902 OC. PW = $15,378 d. PW = $28,000
- The company issues 10.0%, 10-year bonds with a total face amount of $1,000,000. The market interest rate for bonds of similar risk and maturity is 9.8%. Interest is paid semi-annually. DO NOT ROUND YOUR ANSWERS UNTIL YOU FULLY COMPLETE THE PROBLEM SET. 1. $ 2. $ 3. $ How much will be paid in interest each interest payment? (rounded to nearest dollar). What is the present value of the interest payments? (rounded to nearest dollar). What is the issue price of the bond?a. Determine the annual before-tax interest cost for each company in dollars. b. Determine the annual after-tax interest cost for each company in dollars. (Round your answers to the nearest dollar amount.) c. Determine the annual after-tax interest cost for each company as a percentage of the face value of the bonds. (Round your answers to 1 decimal place.)2. DEF Company will issue $8,000,000 in 10%, 10-year bonds when the market rate of interest is 7%. Interest is paid semiannually. Required: a. Will this interest structure result in a Premium for DEF company or a Discount? b. How much cash will be received from the issuance of the bond? c. How much will the semi-annual interest payment be on the bond?
