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Delayed Exports has four bonds outstanding. If the relevant tax rate is 35 percent, what is...

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Finance

Delayed Exports has four bonds outstanding. If the relevant taxrate is 35 percent, what is the after-tax cost of Delayed Exports'debt ? (Do not round your intermediatecalculations.)

  

Bond

Coupon Rate

Yield to Maturity

Price Quote (% of Face Value)

Maturity

Face Value

16.50%     6.30%1016 years       $ 25,000,000   
27.60%        6.01%110     8 years       $ 41,000,000   
36.70%        6.42%103     18 years       $ 45,000,000   
47.70%        6.55%115     30 years       $ 56,000,000   

Answer & Explanation Solved by verified expert
4.1 Ratings (428 Votes)

Weight Average Cost =SUMof( Weight* Yield tomaturity)
A B C D E F=C*E G=F/181100000 H=B*G
Bond Coupon Rate Yield to Maturity Price Quote (% of Face Value) Maturity Face Value Market Value Weight Yield *Weight
1 6.50%      6.30% 101% 6 years        $25,000,000 $25,250,000                         0.1394 0.88%
2 7.60%         6.01% 110% 8 years        $41,000,000 $45,100,000                         0.2490 1.50%
3 6.70%         6.42% 103% 18 years        $45,000,000 $46,350,000                         0.2559 1.64%
4 7.70%         6.55% 115% 30 years        $56,000,000 $64,400,000                         0.3556 2.33%
TOTAL $181,100,000                             1.00 6.35%
Before tax cost of Debt 6.35%
After tax cost of debt =6.35*(1-Tax Rate) 4.13% 6.35*(1-0.35)

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