Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can you please help with these 4 questions? Cote Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in

Can you please help with these 4 questions?

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Cote Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. Bond 1 2 Coupon Rate 7.00 % 8.50 8.20 7.80 Price Quote 103.54 110.86 110.21 103.11 Maturity 5 years 8 years 15.5 years 25 years Face Value $ 45,000,000 40,000,000 50,000,000 65,000,000 3 4 If the corporate tax rate is 34%, what is the after-tax cost of the company's debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of debt % Pearce's Cricket Farm issued a 30-year, 8% semiannual bond 5 years ago. The bond currently sells for 93% of its face value. The company's tax rate is 25%. Assume the par value of the bond is $1,000. a. What is the pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) Pre-tax cost of debt b. What is the after-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.) After-tax cost of debt % c. Which is more relevant, the pre-tax or the after-tax cost of debt? After-tax cost of debt O Pre-tax cost of debt Cornwell Industries stock has a beta of 1.10. The company just paid a dividend of $1.44, and the dividends are expected to grow at 4%. The expected return on the market is 10%, and Treasury bills are yielding 3.2%. The most recent stock price for the company is $72. a. Calculate the cost of equity using the dividend growth model method. (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Dividend growth model method 1% b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Round the final answer to 3 decimal places.) SML method % Welling Inc. has a target debt-equity ratio of 0.82. Its WACC is 9.8%, and the tax rate is 35%. a. If the company's cost of equity is 14%, what is its pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of debt 1% b. If instead you know that the after-tax cost of debt is 6.8%, what is the cost of equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of equity %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Principles And Practices

Authors: Timothy J. Gallagher

9th Edition

1954156103, 978-1954156104

More Books

Students also viewed these Finance questions

Question

Explain the nature of human resource management.

Answered: 1 week ago

Question

Write a note on Quality circles.

Answered: 1 week ago

Question

Describe how to measure the quality of work life.

Answered: 1 week ago