Home GradesPersonalized Reviews Discussion Course Materials

Home GradesPersonalized Reviews Discussion Course Materials nal Exam -Chapters 7-11,14,16 Back to Assignment Deadline Today at 09.00 P The Hinbart CompanyAens currently outstanding bonds have a 8% coupon and a 10% yield to maturity Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is HeuserÄc??s after-tax cost of debt? 17. ? 0 A.5.70% B. 6.50% C. 6.70% D. 5.20% Continue without saving Copyright NoticesTerms of Use Privacy Notice Security Notice Accessibility

Solution

ANSWER = D) 5.2 %

COUPON RATE = 8%

YTM (Yield to maturity) = 10%

Tax rate = 35%

After tax cost of debt = Coupon rate * ( 1 - Tax rate)

= 8 * (1- 0.35)

= 5.20 %