Question
Debt Sanction Company's noncallable bonds were issued several years ago and now have 13 years to maturity. These bonds have a 6.5% annual coupon, paid
Debt Sanction Company's noncallable bonds were issued several years ago and now have 13 years to maturity. These bonds have a 6.5% annual coupon, paid annually, selling at a price of $958.21 per bond with a par value of $1,000. To raise more capital, the company will issue new 20-year bonds with a flotation cost of 6%. If the firm's tax rate is 30%, what is the yield to maturity of the existing bonds and what is the component cost of debt for use in the WACC calculation?
YTM of existing bonds: %
Cost of debt in WACC calculation: %
(Express your answer in % and round to the second decimal place. For example, if your answer is 0.1234, write it as 12.34 and leave out the percentage sign.)
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