Business, 10.08.2021 22:10 florencemarti7331
Airborne Airlines Inc. has a $1,000 par value bond outstanding with 20 years to maturity. The bond carries an annual interest payment of $104 and is currently selling for $900. Airborne is in a 35 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar.
Required:
a. Compute the yield to maturity on the old issue and use this as the yield for the new issue.
b. Make the appropriate tax adjustment to determine the aftertax cost of debt.
Answers: 1
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You are head of the schwartz family endowment for the arts. you have decided to fund an arts school in the san francisco bay area in perpetuity. every 5 years, you will give the school $ 1 comma 000 comma 000. the first payment will occur 5 years from today. if the interest rate is 5.9 % per year, what is the present value of your gift?
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Airborne Airlines Inc. has a $1,000 par value bond outstanding with 20 years to maturity. The bond c...
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