Question 23 Which of the following statements is CORRECT? Question 24 Which of the following bonds has the greatest interest rate price risk? Question 25 A 10-year bond pays an annual coupon, its YTM is 8%, and it currently trades at a premium. Which of the following statements is CORRECT? Question 26 Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as
They then develop target leverage ratios and use the WACC to determine the cost of capital for the whole corporation as well as each of the three divisions. 1. What is the weighted average cost of capital (WACC) for Marriott Corporation (2 points)? 2 Cost of Debt = risk free weight + debt rate premium above gov’t = 8.95% + 1.30% = 10.25% Levered Beta βE = βU * [1 + (1-tax rate)(target leverage / (1 - target leverage))] = 0.80 * [1 + (1-0.44)(0.60 / (1 – 0.60))] = 1.472 Cost of Equity = risk-free rate + βE(risk premium) = 0.0895 + 1.472(.0743) = 0.2079 rME = 8.95% + 1.472 * 7.43% = 19.89% WACC = (1-T) * pretax cost
You may use a number of sources, but we recommend Morningstar. Find the YTM of one 15 or 20 year bond with the highest possible creditworthiness. You may assume that new bonds issued by AirJet Best Parts, Inc. are of similar risk and will require the same return. (5 pts) b. What is the after-tax cost of debt if the tax rate is 34%?
By using the CAPM model, the cost of equity is: (1.34% + 0.9(7.5% - 1.34%)) = 6.90% b. Estimate the cost of Debt for Delta. The after-tax cost of debt is: Rate(1-Taxrate) = 3.64%(1 -.30) = 2.55% The market value of equity is price*shares = $27.70*850,902,527. The sum of these is $23.57 billion, which is also the market cap. The long term debt is $11,082 million.
Each bond would have 75 warrants attached to it, each exercisable into one share of stock at an exercise price of $47. The firm’s straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds-with-warrants at par? Question 24 Europa Corporation is financing an ongoing construction project.
If she were to move to another state where her marginal state rate would be 10 percent, would her choice be any different? Assume that Dana itemizes deductions. When the state rate is 5 percent, Dana would achieve the following returns from the Treasury bond or the corporate bond: The Treasury bond yields $1,125 or $30,000 x [.05 x (1-.25)] after tax. The corporate bond yields $1,282.50 or $30,000 x [.06 x (1 - .25 - .05(1-.25))] after tax. Note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return.
The asset purchase option will generate $700,000 million more tax obligation than stock purchase do. However, under the asset purchase method, the goodwill generated from this transaction could be depreciated over 15 years, or $900,000 annually over 15 years. To justify the price of $40 million, we adjusted an APV approach. We derived the unlevered beta from the comparable firm Modtech. Adding other assumptions to our valuation model, we concluded a firm value of $83.92 million, and 73% of the firm value is $65.17 million.
In total it will be $74,295; since the investors paid $80,000 the yield rate is less than 8%. As for the correctness of the $748 first year bond discount amortization, the calculation follows: Since the bond proceeds were $80,000 and the true yield is 7.23% per year. 7.23% came from the interest table that I have. Then for Year 1 net interest should be $80,000*.0723 =$5784. But the stated interest payment is $5,000, thus the $784 interest expense is amortization of the bond discount.
At this price, the bonds yield 11.8 percent. The coupon rate on the bonds is percent. (Do not include the percent sign (%). Round your answer to 1 decimal place. (e.g., 32.1)) | Ackerman Co. has 10 percent coupon bonds on the market with sixteen years left to maturity.
FIN 571 Week 4 Connect Problems – Assignment 1. Microhard has issued a bond with the following characteristics: Par: $1,000 Time to maturity: 11 years Coupon rate: 9 percent Semiannual payments Calculate the price of this bond if the YTM is (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. ): Price of the Bond a. 9 percent $ _____ b. 11 percent $ _____ c. 7 percent $ _____ 2.