Company A's 10 percent coupon rate, quarterly payment, $1,000 par value bond, which matures in 10 years, currently sells at a price of $950. The company's tax rate is 40 percent. Based on the nominal interest rate, what is the firm's component cost of debt for purposes of calculating the WACC

Before tax cost of debt = 10.84%

After tax cost of debt = 6.72%

Explanation:

given data

coupon rate = 10%

Maturity value =  $1,000

time = 10 year = 40 Quarter  

currently sells price =  $950

tax rate = 40 percent

solution

we get here first Quarterly Coupon Payment that is

Quarterly Coupon Payment  = 10% × 1,000 ×      

Quarterly Coupon Payment = $25

and

here Cost of Debt is Annual YTM so we get here rate r as Quarterly YTM

so

950 = 25 × PVIFA(r%, 40) + 1,000 × PVFA(r%, 40)  

solve we get

rate r = 2.71 %

so Annual YTM is

Annual YTM = 4 ×  2.71%

Annual YTM =  10.84%

so

Before tax cost of debt = 10.84%

and

After tax cost of debt = 10.84% × (1-0.38)

After tax cost of debt = 6.72%

i would have to say its c

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi