You are a financial analyst for a company that has recently issued $100 million in 10-year bonds with a coupon rate of 5% paid annually. The bonds were issued at a price of $98 per $100 face value bond. The company plans to use the proceeds to finance a new project that will have an expected return of 8%. The company has a marginal tax rate of 25%.

a) What is the total interest expense the company will pay over the life of the bonds?
b) What is the net proceeds the company received from issuing the bonds?
c) Calculate the after-tax cost of debt for the company.
d) Calculate the present value of the cash flows associated with the project.

Answer rating: 100% (QA)

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