To calculate the after-tax cost of debt. multiply the before-tax cost of debt by

To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Water and Power Company (WPC) can borrow funds at an interest rate of 10.20% for a period of four years. Its marginal federal-plus-state tax rate is 45%. WPCs after-tax cost of debt is (rounded to two decimal places). At the present time, Water and Power Company (WPC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,329.55 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If WPC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? O 4.02% O 4.47% O 3.58% O 5.14% To determine the after-tax price of financial obligation, increase the before-tax price of financial obligation by liquid and electric company (WPC) can borrow money at mortgage of 10.20percent for a time period of four years. Its marginal federal-plus-state income tax price is 45percent. WPC’s after-tax price of financial obligation is (curved to two decimal places). Currently, liquid and electric company (WPC) has 15-year noncallable bonds with a face value of $1,000 which can be outstanding. These bonds have actually an ongoing selling price of $1,329.55 per relationship, carry a coupon price of 12percent, and circulate yearly voucher repayments. The business incurs a federal-plus-state income tax price of 45percent. If WPC would like to issue brand new financial obligation, just what will be an acceptable estimate because of its after-tax price of financial obligation (curved to two decimal places)? O 4.02percent O 4.47percent O 3.58percent O 5.14percent
By learning from your errors i = 8.12percent
1329.55 = 120/i*(1-1/(1+i)^15) + 1000/(1+i)^15
income tax price = 45percent
income tax price = 45percent

After income tax price of financial obligation = 8.12%*0.55 = 4.47percent

2. Before income tax price of financial obligation = 10.2percent
3. cost of relationship = C/i*{1-1/(1+i)^n} + P/(1+i)^n
After income tax price of financial obligation = 10.2*0.55 = 5.61percent

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