Before and after-tax cost of debt financing

FratBro23
Category:
Business & Finance
Price: $5 USD

Question description

1. Black Hill Inc. sells $100 million worth of 23-year to maturity 6.50% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $985 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. 


2. Great Seneca Inc. sells $100 million worth of 25-year to maturity 13.76% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $992 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital for this debt financing?

Round the answer to two decimal places in percentage form.


Tutor Answer

(Top Tutor) Daniel C.
(997)
School: UT Austin
PREMIUM TUTOR
Studypool has helped 1,244,100 students
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1827 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors