A company just issued a 15 year bond for a price of $122.24 that pays...
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Accounting
A company just issued a 15 year bond for a price of $122.24 that pays coupons annually. The coupon rate is 6 percent per annum, the yield is 4 percent per annum and the principal is $100. The bond buyer was also a company. Both the buying and selling companies are subject to a 30% corporate tax rate.
Which of the following statements is NOT correct? All things remaining equal, per one bond, every year:
Select one:
a. The coupon paid will be $6.
b. The tax-deductible interest expense for the issuing company will be $4.89.
c. The extra interest tax shields generated for the issuing company due to the bond will be $1.47.
d. The taxable interest revenue for the bond buyer will be $6.
e. The extra tax payable by the bond buyer due to the interest revenue will be $1.47. This is a negative tax shield for the bond buyer.
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