LL Incorporated\'s currently outstanding 8% coupon bonds have a yield to maturit
ID: 2639451 • Letter: L
Question
LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 12%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 30%, what is LL's after-tax cost of debt? Round your answer to two decimal places.
Burnwood Tech plans to issue some $60 par preferred stock with a 7% dividend. A similar stock is selling on the market for $60. Burnwood must pay flotation costs of 6% of the issue price. What is the cost of the preferred stock? Round your answer to two decimal places.
Explanation / Answer
After tax cost of debt= yield of maturity *[1-tax rate]
= 12%*[1-0.30]
=12%*[.70]
= 8.40%
Cost of preference stock= price of preference shares* floating cost
= $60*6%
=$3.60
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