A company is going to issue a $1,000 par value bond that pays a 7% annual coupon.The company expects investors to pay $942 for the 20-year bond.The expected flotation cost per bond is $42,and the firm is in the 34% tax bracket.Compute the following:
a.The yield to maturity on the firm's bonds
b.The firm's after-tax cost of existing debt
c.The firm's after-tax cost of new debt

Question

A company is going to issue a $1,000 par value bond that pays a 7% annual coupon.The company expects investors to pay $942 for the 20-year bond.The expected flotation cost per bond is $42,and the firm is in the 34% tax bracket.Compute the following: 
a.The yield to maturity on the firm's bonds 
b.The firm's after-tax cost of existing debt 
c.The firm's after-tax cost of new debt

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The Answer of A company is going to issue a $1,000 par value bond that pays a 7% annual coupon.The company expects investors to pay $942 for the 20-year bond.The expected flotation cost per bond is $42,and the firm is in the 34% tax bracket.Compute the following: 
a.The yield to maturity on the firm's bonds 
b.The firm's after-tax cost of existing debt 
c.The firm's after-tax cost of new debt

A Company Is Going to Issue a $1,000 Par Value