Question
1) Goofy Gas Works has bonds that mature in 10 years The bonds have a 10% coupon rate paid quarterly. They have a before tax
1) Goofy Gas Works has bonds that mature in 10 years
The bonds have a 10% coupon rate paid quarterly.
They have a before tax cost of debt of 8% and a tax bracket of 35%
What is the cost of debt? Answer should be 5.2%, need work to justify all answers.
2) Wild Child Motors has a 12 year bond that carries an 8% semi-annual coupon rate and a nominal yield to maturity of 6%. The firm incurs flotation costs of 3% of the price of the bond. What is the cost of the debt if the firm is in the 40% tax bracket? answer should be 3.83%
3) Jolly Jelly bean Co. has a bond with a 12 year maturity date and a 9% Semi-annual coupon rate.The bond had a Nominal yield to maturity of 7%. The firm would pay $3 flotation cost. What is the bonds cost of debt if the firm is in the 35% tax bracket? answer should be 4.58%
Please help with all 3 problems!!!!
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