Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and
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Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 15 years. Investors are willing to pay $850 for the bond. Flotation costs will be 3 percent of market value. The company is in a 30 percent marginal tax bracket. What will be the firm's after-tax cost of debt on the bond?
Cost Of DebtThe cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Foundations Of Finance
ISBN: 9780134083285
9th Edition
Authors: Arthur J. Keown, John H. Martin, J. William Petty
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