Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed...

60.1K

Verified Solution

Question

Finance

Ying Import has several bond issues outstanding, each makingsemiannual interest payments. The bonds are listed in the followingtable.
Bond Coupon Rate Price Quote Maturity Face Value
1 5.9 % 105.66 5 years $ 51,000,000
2 7.5 114.42 8 years 46,000,000
3 7.4 112.97 15.5 years 66,000,000
4 6.7 102.21 25 years 73,000,000
If the corporate tax rate is 21 percent, what is the aftertaxcost of the company’s debt?

Answer & Explanation Solved by verified expert

4.4 Ratings (572 Votes)

Solution Aftertax cost of the companys debt 453 Working Notes Calculation of market value of debt and its weight in the total debt QuoteFace value per bond x total face value Market value total market value 255693300 Bond Price Quote Face value Market value Weight 1 10566 51000000 53886600 0210747016 10566100 x 51000000 53886600255693300 2 11442 46000000 52633200 020584505 3 11297 66000000 74560200 0291600132 4 10221 73000000 74613300 0291807803 Total 255693300 1 Since these bond are paying semi annual coupon means twice a year Its YTM can be exactly calculated by financial calculator or excel method here we use excel See Answer

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!

Become a Member

Transcribed Image Text

Ying Import has several bond issues outstanding, each makingsemiannual interest payments. The bonds are listed in the followingtable.BondCoupon RatePrice QuoteMaturity Face Value15.9%105.665years$51,000,00027.5114.428years46,000,00037.4112.9715.5years66,000,00046.7102.2125years73,000,000If the corporate tax rate is 21 percent, what is the aftertaxcost of the company’s debt?

Bond	Coupon Rate			Price Quote		Maturity		Face Value
1		5.9	%		105.66	5	years	$	51,000,000
2		7.5			114.42	8	years		46,000,000
3		7.4			112.97	15.5	years		66,000,000
4		6.7			102.21	25	years		73,000,000