2) To calculate the after-tax cost of debt, multiply the before-tax cost of debt by ------ . Water and Power Company (WPC) can borrow funds at an interest rate of 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 40%. WPC’s after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,092.79 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 4.57% 5.14% 5.71% 6.57%

2) To calculate the after-tax cost of debt, multiply the before-tax cost of debt by ------ . Water and Power Company (WPC) can borrow funds at an interest rate of 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 40%. WPC’s after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,092.79 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 4.57% 5.14% 5.71% 6.57%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 16P

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To calculate the after-tax cost of debt, multiply the before-tax cost of debt by(1 – T) . Andalusian Limited (AL) can borrow funds at an interest rate of 9.70% for a period of six years. Its marginal federal-plus-state tax rate is 25%. AL’s after-tax cost of debt is 7.28% (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 7.84% 5.88% 6.53% 5.22%
1. To calculate the after-tax cost of debt, multiply the before-tax cost of debt by ______. 2. Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of six years. Its marginal federal-plus-state tax rate is 25%. WGC’s after-tax cost of debt is ________. (rounded to two decimal places). 3. At the present time, Western Gas & Electric Company (WGC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,555.38 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 4.73% 4.11% 4.93% 3.29%
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Water and Power Company (WPC) can borrow funds at an interest rate of 12.50% for a period of eight years. Its marginal federal-plus-state tax rate is 25%. WPC's after-tax cost of debt is (rounded to two decimal places).
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Please include calculations: A $100,000 loan can be obtained at a 10 percent rate with monthly payments over a 15-year term. a. What is the after-tax effective interest rate on the loan, assuming the borrower is in a 30 percent tax bracket and the loan is held only three years? Assume that the benefit of interest deductions for tax purposes occurs at the same time payments are made. b. Calculate the after-tax effective cost for the above loan, assuming that 5 points are charged and that the points are tax deductible at the time they are paid. c. How does the after-tax cost in part (b) compare with the pretax effective cost of the loan?
BBC borrows a 19-year loan of $12,122 at 8% to finance a project. The corporate tax rate is 33%. If BBC is required to repay 1/5 of the loan at the end of year 7 and the remaining balance at the end of year 19, what is the net present value of this debt financing
DBF borrows $3.29B by issuing 12-year bonds. ECB's cost of debt is 6.07%, so it will need to pay interest each year for the next 12 years, and then repay the principal $3.29B in year 12. ECB's marginal tax rate will remain 42.99% throughout this period. By how much does the interest tax shield increase the value of DBF? NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.000, etc.