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
1
6.50%
6.30%
101
6 years
$ 25,000,000
2
7.60%
6.01%
110
8 years
$ 41,000,000
3
6.70%
6.42%
103
18 years
$ 45,000,000
4
7.70%
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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