A firm has issued $45 million in long-term bonds that now have 12 years remaining...
90.2K
Verified Solution
Link Copied!
Question
Accounting
A firm has issued $45 million in long-term bonds that now have 12 years remaining until maturity. The bonds carry an 9% annual coupon and are selling in the market for $1220.74. The firm also has $50 million in market value of common stock. For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt, if the tax rate is 35%?
52.35% debt financed; 4.12% after-tax cost of debt
47.65% debt financed; 5.85% after-tax cost of debt
90.00% debt financed; 3.17% after-tax cost of debt
47.37% debt financed; 2.06% after-tax cost of debt
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.