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common sys has 8% coupon bonds that have a yield to maturity of 10%. If the firm tax rate is 40%, what is its after tax cost of debt

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Jarrod Robel
Jarrod RobelLv2
29 Sep 2019

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The Holmes Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.

1) Goofy Gas Works has bonds that mature in 10 years

The bonds have a 10% coupon rate paid quarterly.

They have a before tax cost of debt of 8% and a tax bracket of 35%

What is the cost of debt? Answer should be 5.2%, need work to justify all answers.

2) Wild Child Motors has a 12 year bond that carries an 8% semi-annual coupon rate and a nominal yield to maturity of 6%. The firm incurs flotation costs of 3% of the price of the bond. What is the cost of the debt if the firm is in the 40% tax bracket? answer should be 3.83%

3) Jolly Jelly bean Co. has a bond with a 12 year maturity date and a 9% Semi-annual coupon rate.The bond had a Nominal yield to maturity of 7%. The firm would pay $3 flotation cost. What is the bonds cost of debt if the firm is in the 35% tax bracket? answer should be 4.58%

Please help with all 3 problems!!!!

LL Incorporated's currently outstanding 6% coupon bonds have a yield to maturity of 15.67%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 27.00%, what is LL's after-tax cost of debt?

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