Question: VEC Inc currently has 3 , 2 2 0 , 0 0 0 zero coupon bonds outstanding, each with a face value of $ 1

VEC Inc currently has 3,220,000 zero coupon bonds outstanding, each with a face value of $1000. The bonds have a maturity of 4 years and they are traded in the market at 87% of par. If the tax rate is 28% what is the after tax cost of debt capital. the answer is 2.55% please show how they got this answer step by step

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

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

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Peyton Smith enjoys listening to all types of music and owns countless CDs. Over the years, Peyton has gained a local reputation for knowledge of music from classical to rap and the ability to put...

Q:

The current treasury market can he summarized as follows, assuming that all rates/yields are quoted as annualized continuous compounding, and all zero- coupon bonds have face value $1: overnight...

Q:

FINANCE 1. The rate of return on the common stock of Lancaster Woolens is expected to be 21 percent in a boom economy, 11 percent in a normal economy, and only 3 percent in a recessionary economy....

Q:

2. World Travel has 7.5 percent, semiannual, coupon bonds outstanding with a current market price of $1,123.46, a par value of $1,000, and a yield to maturity of 6.75 percent. How many years is it...

Q:

Question 3 Company Background: GAP Ltd. is considering a new project that requires a large initial cost, and it needs to calculate its weighted average cost of capital (WACC) to decide whether to...

Q:

12A ( 6 + 2 + 2 + 2 + 4 ] The yield curve is flat and unchanging at 5%. Let's take a 5 year bonds that pays a fixed annual coupon of C% on a face value of 100. Take 6 points of time on the x-axis:...

Q:

Kintel, Inc., management wants to raise $1 million by issuing six-year zero coupon bonds with a face value of $1,000. The companys investment banker states that investors would use an 12.38 percent...

Q:

1) Recall that in a previous HW we showed that if the yield curve is restricted to move only in "parallel shifts", then arbitrage opportunities would be available. The purpose of this problem is to...

Q:

Hello Very important, Need help! Can anyone answer these finance problems? Is that possible to get answers in 7hrs? Very important and let me know, reply me back please! Thanks! Question 1: A stock...

Q:

Today is t = 0. You may assume the discount rate is 0%. Vapepsi is seeking to raise money for international expansion by issuing a conditional convertible bond. This bond is a 1-year zero coupon bond...

Q:

Today is t = 0. You may assume the discount rate is 0%. Vapepsi is seeking to raise money for international expansion by issuing a conditional convertible bond. This bond is a 1-year zero coupon bond...

Q:

The UFSU Corporation intends to borrow $450,000 to support its short-term financing requirements during the next year. The company is evaluating its financing options at the bank where it maintains...

Q:

The chart below lists the sales in thousands of dollars based on the advertising budget for that quarter. The regression equation is Y' = 4.073 + 0.8351X. What is the correlation coefficient?...

Q:

Find - 4 1 ( 7 x 4 + 2 x 5 ) d x

Q:

Maas LLP developed software that helps farmers to plow their fields in a manner that prevents erosion and maximizes the effectiveness of irrigation. Sunny Dale paid a licensing fee of $24,000 for a...

Q:

Orange Inc. offers a discount on an extended warranty on its oPhone when the warranty is purchased at the time the oPhone is purchased. The warranty normally has a price of $150, but Orange offers it...

Q:

Minarski Electronics sells computers and provides hardware maintenance services. On April 1st, Minarski sold a package deal containing a computer and a one-year unlimited maintenance/repair service...

Q:

Firm X is considering the replacement of an old machine with one that has a purchase price of $90,000. The current market value of the old machine is $28,000 but the book value is $33,000. The firm's...

Q:

What is a cast? C++

Q:

Please provide example of matrix - based tools ( e . g . , technology balance sheet, technology income sheet, technology acquisition tool )

Q:

LO4 Explain the various methods of estimating a firms supply of human resources.

Q:

LO3 Discuss methods for estimating an organizations demand for human resources.

Q:

What are four trends (or attributes) in the Canadian labour market that have implications for a human resource manager? Explain your answer, citing which of the human resource functions will be...