Problem 1: P9-4 Page 420 C, D, E (30 points) Cost of debt using the approximation formula; Supply bond answers for each bond. Glve answers for the before-tax cost of debt and the after tax cost of debt Refer to pages 404 & 405 in textbook illustrates how to solve by calculator, excel and formula for before tax cost of debt, then solve for each bond Use 40% for the tax cost. Before tax cost of debt $1,000-N) 1 + n N+S1,000 2 After-tax cost of debt=r2x (1 - 1) where: ra - pre-tax cost of debt Na= Net proceeds from bond sale = number of years to maturity 1 Annual interest payments in dollars. After tax cost of debt =rax (1-7) Bond C: Before tax cost of debt $1.000- N 22 N + $1,000 2 I = Annual interest payments in dollars. Bond C: Before tax cost of debt - After tax cost of debt-r4(1-7) 7+ $1,000 - 11 N +$1,000 2 After tax cost of debt #rix (1-1) Bond D: Before tax cost of debt - $1,000 - N 1+ N+$1,000 2 After tax cost of debt rx (17) Bond E. Before tax cost of debt $1.000 -- + VH $1.000 2 PL Problem 1: P9-4 Page 420 C, D, E (30 points) Cost of debt using the approximation formula; Supply bond answers for each bond. Glve answers for the before-tax cost of debt and the after tax cost of debt Refer to pages 404 & 405 in textbook illustrates how to solve by calculator, excel and formula for before tax cost of debt, then solve for each bond Use 40% for the tax cost. Before tax cost of debt $1,000-N) 1 + n N+S1,000 2 After-tax cost of debt=r2x (1 - 1) where: ra - pre-tax cost of debt Na= Net proceeds from bond sale = number of years to maturity 1 Annual interest payments in dollars. After tax cost of debt =rax (1-7) Bond C: Before tax cost of debt $1.000- N 22 N + $1,000 2 I = Annual interest payments in dollars. Bond C: Before tax cost of debt - After tax cost of debt-r4(1-7) 7+ $1,000 - 11 N +$1,000 2 After tax cost of debt #rix (1-1) Bond D: Before tax cost of debt - $1,000 - N 1+ N+$1,000 2 After tax cost of debt rx (17) Bond E. Before tax cost of debt $1.000 -- + VH $1.000 2 PL