Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750...

 

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Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 20-year 5.00% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $1,009.32 per bond and the flotation cost was $17.34 per bond. Pepsi's corporate tax rate is 21%. a. Ignoring flotation costs, what is Pepsi's before-tax and after-tax costs of debt? b. Considering flotation costs, what is Pepsi's before-tax and after-tax costs of debt? a. Ignoring flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.) Ignoring flotation cost, Pepsi's after-tax cost of debt is %. (Round to two decimal places.) b. Considering flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.) Considering flotation cost, Pepsi's after-tax cost of debt is %. (Round to two decimal places.) Flotation costs and the cost of debt In March of 2020 PepsiCo, Inc. (PEP) sold $750 million worth of 20-year 5.00% coupon bonds that pay semi-annual interest. At the time the bonds were issued, the market paid $1,009.32 per bond and the flotation cost was $17.34 per bond. Pepsi's corporate tax rate is 21%. a. Ignoring flotation costs, what is Pepsi's before-tax and after-tax costs of debt? b. Considering flotation costs, what is Pepsi's before-tax and after-tax costs of debt? a. Ignoring flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.) Ignoring flotation cost, Pepsi's after-tax cost of debt is %. (Round to two decimal places.) b. Considering flotation cost, Pepsi's before-tax cost of debt is %. (Round to two decimal places.) Considering flotation cost, Pepsi's after-tax cost of debt is %. (Round to two decimal places.)

Answer rating: 100% (QA)

a Ignoring flotation costs 1 Beforetax cost of debt The coupon rate on the bond is 500 Since the bon... View the full answer