Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 14 percent and will be sold at a market price of $1050. Flotation costs will amount to 6 percent of market value. The bonds will mature in 15 years and nterest payments will be made semi-annually. The company's marginal tax rate is 21%. What is the firm's after-tax cost of debt financing?
Blue Sky Corporation is planning to issue $1,000 par value bonds. The bonds will have a coupon rate of 14 percent and will be sold at a market price of $1050. Flotation costs will amount to 6 percent of market value. The bonds will mature in 15 years and nterest payments will be made semi-annually. The company's marginal tax rate is 21%. What is the firm's after-tax cost of debt financing?
Foundations of Business (MindTap Course List)
6th Edition
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Chapter16: Mastering Financial Management
Section: Chapter Questions
Problem 3DQ
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