Before tax cost finance question

User Generated

yrfyvrpnthva

Business Finance

Description

Black Hill Inc. sells $100 million worth of 13-year to maturity 11.40% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $979 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?

Round the answer to two decimal places in percentage form. 

I came up with the answer 11.72%, just want to make sure I am on the right track. 

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Explanation & Answer

Thank you for the opportunity to help you with your question!

Your answer is correct, Using excel formula for =rate(13, 114,-975,1000) , I got the same result 11.72%

Please let me know if you need any clarification. I'm always happy to answer your questions.


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