Ying Import has several bond issues outstanding, each making semiannual interest
ID: 2765528 • Letter: Y
Question
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below.
What is the market value of each of the company's bonds? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
What is the market value weight of each of the company's bonds? (Round your answers to 4 decimal places (e.g., 32.1616).)
What is the YTM of each of the company's bonds? (Input your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
If the corporate tax rate is 30 percent, what is the aftertax cost of the company’s debt? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below.
Explanation / Answer
1)
2)
Working
3)What is the YTM of each of the company's bonds? (Input your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Bond 1
YTM = rate(nper,pmt,pv,fv)*2
Nper (indicates the semi annual period) = 6*2 =12
PV (indicates the price) = 1000*105.6% = 1056
PMT (indicate the semi annual payment) = 1000*8.6%*1/2 = 43
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
YTM = rate( 12,43,-1056,1000)*2
YTM = 7.43%
Bond 2
YTM = rate(nper,pmt,pv,fv)*2
Nper (indicates the semi annual period) = 9*2 =18
PV (indicates the price) = 1000*94.8% = 948
PMT (indicate the semi annual payment) = 1000*6.8%*1/2 = 34
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
YTM = rate( 18,34,-948,1000)*2
YTM = 7.61%
Bond 3
YTM = rate(nper,pmt,pv,fv)*2
Nper (indicates the semi annual period) = 16.5*2 =33
PV (indicates the price) = 1000*104.4% = 1044
PMT (indicate the semi annual payment) = 1000*8.3%*1/2 = 41.5
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
YTM = rate( 33,41.5,-1044,1000)*2
YTM = 7.82%
Bond 4
YTM = rate(nper,pmt,pv,fv)*2
Nper (indicates the semi annual period) = 26*2 =52
PV (indicates the price) = 1000*106.3% = 1063
PMT (indicate the semi annual payment) = 1000*8.8%*1/2 = 44
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
YTM = rate( 52,44,-1063,1000)*2
YTM = 8.21%
4)If the corporate tax rate is 30 percent, what is the aftertax cost of the company’s debt? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Before tax cost of Debt = 0.1412*7.43% + 0.2242*7.61% + 0.2738*7.82% + 0.3608*8.21%
Before tax cost of Debt = 7.8586%
Aftertax cost of the company’s debt = Before tax cost of Debt*(1-tax rate)
Aftertax cost of the company’s debt = 7.8586%*(1-30%)
Aftertax cost of the company’s debt = 5.50%
Bond Market value 1 27456000 2 43608000 3 53244000 4 70158000Related Questions
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