A corporation has a corporate tax rate of 35%. Please calculate their after tax

Question

A corporation has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. The Corporation has several outstanding bond issues all of which require semiannual interest payments. Bond A has a coupon rate of 4.0%; a price quote 110; maturity is 6 years; and the face value is $100,000. Bond B has a coupon rate of 6.5%; a price quote of 120; maturity is 9 years; and the face value is $30,000. Bond C has a coupon rate of 9.2%; a price quote of 95; maturity is 16 years; and the face value $60,000. Bond D has a coupon rate of 9.9%; a price quote of 115; maturity is 24 years; and the face value is $50,000.

Explanation / Answer

Bond Annualised Yield Aftre tax cost of debt (Yield*(1-35%)) A 2.21% RATE(12,20,-1100,1000)*2 1.44% B 3.85% RATE(18,32.5,-1200,1000)*2 2.50% C 9.83% RATE(32,46,-950,1000)*2 6.39%

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