A firm has issued $45 million in long-term bonds that now have 12 years remaining...
90.2K
Verified Solution
Link Copied!
Question
Accounting
A firm has issued $45 million in long-term bonds that now have 12 years remaining until maturity. The bonds carry an 9% annual coupon and are selling in the market for $1220.74. The firm also has $50 million in market value of common stock. For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt, if the tax rate is 35%?
52.35% debt financed; 4.12% after-tax cost of debt
47.65% debt financed; 5.85% after-tax cost of debt
90.00% debt financed; 3.17% after-tax cost of debt
47.37% debt financed; 2.06% after-tax cost of debt
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
