Question
WACC for a company. Cost of Debt (part question) The 9% coupon bonds (semiannual pay) have a maturity of 15 years, a face value of
WACC for a company. Cost of Debt (part question)
The 9% coupon bonds (semiannual pay) have a maturity of 15 years, a face value of $1,000, and are currently priced at $1,024.87 per bond. What is the cost of debt?
I've done half way, but do not know how to calculate YTM. Please help, thanks.
N = 15 x 2 = 30
PV = -1,024.87
FV = 1,000
PMT = 1,000 x 0.09 = $90
therefore, $90/2 = $45
I/YR = ?
Cost of debt:
$1,024.87 = $45 x PVIFA(30, YTM/2)+$1,000 x PVIF(30, YTM/2)
Solving, we find that YTM = 0.0870 (this is a pre-tax number)
How do you find YTM = 0.0870? How to get the answer 0.0870?
Is there another way to find PMT=$45 and is there another way to find cost of debt = 0.0870 ? Thank you.
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