Year Revenue Expenses Depreciation Pretax profit Tax Net income OCF 0 6 3.2000 4
ID: 2796200 • Letter: Y
Question
Year Revenue Expenses Depreciation Pretax profit Tax Net income OCF 0 6 3.2000 4.0000 5.6000 5.6000 4.0000 2.4000 .7200 .9000 1.2600 1.2600 .9000 5400 9500 .9500 9500 9500 9500 9500 1.5300 2.1500 3.3900 3.3900 2.1500 9100 5355 .7525 1.1865 1.1865 7525 3185 9945 1.3975 2.2035 2.2035 1.3975 5915 1.9445 2.3475 3.1535 3.1535 2.3475 1.5415 3 3 -5.7000 Cash flow investment Change in NWC OCF Total cash flow 4362 3200-0800-1600 0.0000 1600 1600 2400 0.0000 1.9445 2.34753.15353.1535 2.3475 1.5415 1 -6.0200 18645 2.1875 3.1535 3.3135 2.5075 2.2177Explanation / Answer
Face Value of bond (FV)= $ 1000
Price of bond(PV) = $ 1020
Coupon(PMT) =8% *1000 = 80 per year = 80/4 = 20 per quarter
Number of periods to maturity(nper) = 6 = 6* 4 =24
Yield to maturity of bond(YTM) = rate(24,20,-1020,1000) = 1.9% per quarter = 7.58% pa
After tax cost of debt = 7.58%*(1-35%) = 4.927 %
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