Assume the following information. Tax rate is 21%. There are 20,000 $1,000 par, 5% coupon semi-annual bonds outstanding
Posted: Tue Nov 23, 2021 8:53 am
Assume the following information.
Tax rate is 21%.
There are 20,000 $1,000 par, 5% coupon semi-annual bonds
outstanding (this is the only debt) These bonds are selling at 94%
of par and have 10 years to maturity.
There are 1,000,000 shares outstanding selling at $40/share. The
beta for this stock is 1.2. The risk-free rate is 3%. The expected
return on the market is 10%.
What is the after-tax cost of debt?
Tax rate is 21%.
There are 20,000 $1,000 par, 5% coupon semi-annual bonds
outstanding (this is the only debt) These bonds are selling at 94%
of par and have 10 years to maturity.
There are 1,000,000 shares outstanding selling at $40/share. The
beta for this stock is 1.2. The risk-free rate is 3%. The expected
return on the market is 10%.
What is the after-tax cost of debt?