Problem 11.17 You are analyzing the cost of debt for a firm. You know that the f
ID: 2790880 • Letter: P
Question
Problem 11.17 You are analyzing the cost of debt for a firm. You know that the firm's 14-year maturity, 8.25 percent coupon bonds are selling at a price of $1,064.33. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) The current YTM for the bonds LINK TO TEXT What is the after-tax cost of debt for this firm if it has a 30 percent marginal and average tax rate? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) After-tax cost of debtExplanation / Answer
use financial calculator for YTM
FV=1000
PV=-1064.33
N=14*2=28 semi annual period
PMT=1000*8.25%/2=41.25
Click CPT
Click 1/Y=3.75% er semi annual
YTM=3.75%*2=7.50% is answer
after tax cost of debt=7.50%*(1-30%)=5.25%
the above is the answer