At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,438.04 per bond, carry a coupon rate of 14%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 2.85% 2.48% 2.23% At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,438.04 per bond, carry a coupon rate of 14%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 40%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 2.85% 2.48% 2.23%
Expert Answer:
Answer rating: 100% (QA)
The detailed answer for the above question is provided below To calculate ... View the full answer
Posted Date:
Students also viewed these corporate finance questions
-
New York Series C bonds with a face value of $120 000 mature January 1, 2015, and pay interest at 5% semi-annually. On January 1, 2013, the bonds were sold at a price of 109.007 to yield 0.470%. (a)...
-
The company intends to issue 20-year bonds with a face value of $1,000. The bonds carry a coupon rate of 10%, and interest is paid semiannually. On the issue date, the market interest rate for bonds...
-
A 10-year, 7% coupon bond with a face value of $1,000 is currently selling for $871.65. Compute your rate of return if you sell the bond next year for $880.10.
-
Case Study 1?1 Amazon in 2019 Answer the five questions at the end of the case. Thepurpose of this case, and others you will be assigned, is toillustrate the application of the concepts covered in...
-
Describe the current trends in union membership and union organizing.
-
Suppose you are an administrator at the Environmental Protection Agency. It has been reported that a plant in a small town is in violation of the environmental laws. If you enforce the laws...
-
Jeffrey Hansing, of Wisconsin, wanted to sell his 1964 Ford Galaxie. He decided to list the car for sale on eBay. The winning bidder was Paul Boschetto, who purchased the car for \($34,106.Mr.\)...
-
Rons, Inc.s inventory records for a particular development program show the following at May 31: At May 31, 10 of these programs are on hand. Journalize for Rons: 1. Total May purchases in one...
-
a) Explain the following terms as used in real estate appraisals i. Value in use ii. iii. Liquidation value Insurable value b) Describe the cost approach of real estate valuation c) Explain the...
-
You recently took 5,000 square feet of new space that hadn't been built out at all and put in a childcare facility. That project ended up costing $550,000. But, for this project, you have to demo the...
-
Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/A) equal to 0.8. Firm A has an asset turnover ratio of...
-
(L01) Which items are considered forms of payment that must be included in income? a. Check received for tax return preparation b. Cash received for illegal drug business c. Services exchanged for...
-
(LO4) What form is used to report an individual's rental property activity?
-
Use SecureRandom method ints to generate a stream of 50 random numbers in the range 1 to 999, then filter the resulting stream elements to select only the odd numbers and display the results in...
-
(LO4) Which of the following is not considered a flow-through entity? a. C corporation c. Partnership b. \(\mathrm{S}\) corporation d. Sole proprietorship
-
(LO3) Which of the following statements is correct with regard to changes in accounting methods for federal income tax purposes? a. A taxpayer can never change a method of accounting except when...
-
What exactly is public debt, and how does it work? Will it drastically change in a few years?
-
Nate prepares slides for his microscope. In 1 day he prepared 12 different slides. Which equation best represents y, the total number of slides Nate prepares in x days if he continues at this rate? A...
-
Given the current pricing of ETF 1, the most likely transaction to occur is that: A. new ETF shares will be created by the APs. B. redemption baskets will be received by APs from the ETF sponsor. C....
-
Which ETF in Exhibit 1 is most likely to have the lowest tracking error? A. ETF 2 B. ETF 3 C. ETF 4 Howie Rutledge is a senior portfolio strategist for an endowment fund. Rutledge meets with recently...
-
Stosurs statement about quoted bidask spreads is incorrect with respect to the: A. amount of the ongoing order flow in the ETF. B. costs and risks for the ETF liquidity providers. C. amount of...
Study smarter with the SolutionInn App