1 answer

EBook The Holmes Company's currently outstanding bonds have a 10% coupon and a 14% yield to...

Question:

eBook The Holmes Companys currently outstanding bonds have a 10% coupon and a 14% yield to maturity. Holmes believes it coul
eBook Torch Industries can issue perpetual preferred stock at a price of $74.00 a share. The stock would pay a constant annua
eBook The Holmes Company's currently outstanding bonds have a 10% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places. O looo
eBook Torch Industries can issue perpetual preferred stock at a price of $74.00 a share. The stock would pay a constant annual dividend of $5.50 a share. What is the company's cost of preferred stock, 'p? Round your answer to two decimal places.

Answers

1)

After-tax cost of debt:

= Yield to maturity×(1-Tax rate)

= 14%×(1-25%)

= 10.50%

Hence, after-tax cost of debt is 10.50%

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