Question

ussell Container Corporation has a $1,000 par value bond outstanding with 25 years to maturity. The bond carries an annual interest payment of $97 and is currently selling for $950 per bond. Russell Corp. is in a 20 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar. a. Compute the yield to maturity on the old issue and use this as the yield for the new issue. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

**b.** Make the appropriate tax adjustment to
determine the aftertax cost of debt. **(Do not round
intermediate calculations. Input your answer as a percent rounded
to 2 decimal places.)
**

Answer #1

Ans:

1. Annual interest payment= $97 ;principal payment= $1000; price of bond=950; years to maturity= 25 years 2. cost of debt or yield to maturity= Find in a part 10.20% and tax rate= 20%

Russell Container Corporation has a $1,000 par value bond
outstanding with 25 years to maturity. The bond carries an annual
interest payment of $97 and is currently selling for $950 per bond.
Russell Corp. is in a 20 percent tax bracket. The firm wishes to
know what the after tax cost of a new bond issue is likely to be.
The yield to maturity on the new issue will be the same as the
yield to maturity on the old...

Russell Container Corporation has a $1,000 par value bond
outstanding with 15 years to maturity. The bond carries an annual
interest payment of $125 and is currently selling for $910 per
bond. Russell Corp. is in a 30 percent tax bracket. The firm wishes
to know what the aftertax cost of a new bond issue is likely to be.
The yield to maturity on the new issue will be the same as the
yield to maturity on the old issue...

Russell Container Corporation has a $1,000 par value bond
outstanding with 20 years to maturity. The bond carries an annual
interest payment of $130 and is currently selling for $800 per
bond. Russell Corp. is in a 25 percent tax bracket. The firm wishes
to know what the aftertax cost of a new bond issue is likely to be.
The yield to maturity on the new issue will be the same as the
yield to maturity on the old issue...

Octopus Transit has a $1,000 par value bond outstanding with 20
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$104, payable semiannually, and is currently selling for $1,110.
Octopus is in a 35 percent tax bracket. The firm wishes to know
what the aftertax cost of a new bond issue is likely to be. The
yield to maturity on the new issue will be the same as the yield to
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Octopus Transit has a $1000 par value bond outstanding
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A bond with a face
value of $1,000 has 14 years until maturity, carries a coupon rate
of 8.6%, and sells for $1,104.
a.
What is the current yield on the bond? (Enter your answer
as a percent rounded to 2 decimal places.)
b.
What is the yield to maturity if interest is paid once a year?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 4 decimal places.)
c.
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A 25-year maturity bond with par value $1,000 makes semiannual
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a. Find the bond equivalent and effective
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(Round your intermediate calculations to 4 decimal places.
Round your answers to 2 decimal places.)
Bond equivalent yield to maturity
%
Effective annual yield to maturity
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The Bowman Corporation has a bond obligation of $23 million
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A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 8.8%, and sells for $1,120. Interest is
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a. If the bond has a yield to maturity of 9.2%
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not round intermediate calculations.
Round your answer to nearest whole
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b. What will be the rate of return...

A bond with a face value of $1,000 has 10 years until maturity,
carries a coupon rate of 7.4%, and sells for $1,160. Interest is
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a. If the bond has a yield to maturity of 10.6% 1 year from now,
what will its price be at that time? (Do not round intermediate
calculations. Round your answer to nearest whole number.)
b. What will be the rate of return...

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