Question: S. Claus & Co. is planning a zero coupon bond issue that has a par value of 1,000 and matures in 2 years. The bonds

S. Claus & Co. is planning a zero bond issue that has a of 1,000 and matures in 2 years. The bonds will be sold today at a price of 826.45. If the firm’s marginal tax rate is 40%, what is the annual after-tax to the company on this issue?

Step by Step Solution

★★★★★

3.40 Rating (175 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Pre tax cost of debt 100082645... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-C-F-B-V (226).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

A money market security that has a par value of $10,000 sells for $8,816.60. Given that the security has a maturity of two years, what is the investor's required rate of return?

If you purchase a zero coupon bond today for $225 and it matures at $1,000 in 11 years, what rate of return will you earn on that bond (to the nearest 1/10 of 1 percent)?

S. Claus & Co. is planning a zero coupon bond issue that has a par value of $1,000 and matures in 2 years. The bonds will be sold today at price of $930.00. If the marginal tax rate is 40%, what is...

1. A bond that pays no annual interest but is sold at a discount below its par value is called what? a. Income bond. b. Callable bond. c. Convertible bond. d. Putable bond. e. Zero coupon bond. 2....

QUESTION 1 The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: 1. average tax rate. 2. variable tax rate. 3. marginal tax rate....

The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: 1. average tax rate. 2. variable tax rate. 3. marginal tax rate. 4. fixed...

need this done in 2hrs...multiple choice..see attached QUESTION 1 The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the: 1. average...

QUESTION 1 1. Which of the following is a source of cash? 1. The purchase of new fixed assets. 2. Dividends paid. 3. The repurchase of outstanding common stock. 4. A decrease in long-term debt. 5. A...

S. Claus & Company is planning a zero coupon bond issue. The bond has a par value of $1,000, matures in 2 years, and will be sold at a price of $826.45. What is the annual cost of debt (YTM) to the...

S. Claus & Company is planning a zero coupon bond issue. The bond has a par value of $1,000, matures in 2 years, and will be sold at a price of $857.34. What is the annual cost of debt (YTM) to the...

Which diagram represents a box in equilibrium? 2N Box -5N 2N- Box +2 N 5N- 5N 5N (1) (3) 2N 5N Box -5N Box -3N 5N- 2'N 2N (2) (4)

The following procedures were recently installed by The Insideout Company: a. All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record...

Why would you spend an extra hour reading this text rather than going to a movie or sleeping?

22. Two-Period Binomial Option Pricing (CEA2) A stock with a current price $78 has a call option available with a strike price of $80. The stock will move up by a factor of 95 or down by a factor of...

The financial statements of a company are managements, not the accountants. Discuss the implications of this statement.

Olga Conrad, a financial writer, noted recently, There are substantial arguments for including earnings projections in annual reports and the like. The most compelling is that it would give anyone...

The following comment appeared in the financial press: Inadequate financial disclosure, particularly with respect to how management views the future and its role in the marketplace, has always been a...

Use the provided cumulative distribution function to find the value of x that satisfies each equation. if x 0 ( A ) P( O

A project that provides annual cash flows of $17,100 for nine years costs $77,000 today. What is the NPV for the project if the required return is 8 percent? (Do not round intermediate calculations....

The inflation rate in the U.S. is 8%, while the inflation rate in Swiss is 3%. The current exchange rate for the Swiss franc is $1.05. After supply and demand for the Swiss franc has adjusted in the...