Purchase Solution

Olympic's before-tax and after-tax cost of debt

Not what you're looking for?

Ask Custom Question

15. Cost of Debt. Olympic sports has two issues of debt outstanding. One is a 9 percent coupon bond with a face value of $20million, a maturity of 10 years, and a yield to maturity of 10 percent. The coupons are paid annually, and a coupon rate 10 percent. The face value of the issue is $25 million, and issue sells for 94 percent of par value. The firm's tax rate is 35 percent.
a. What is the before-tax cost of debt for Olympic?
b. What is Olympic's after-tax cost of debt?

Purchase this Solution
Solution Summary

This solution is comprised of a detailed explanation to answer what is the before-tax cost of debt for Olympic and Olympic's after-tax cost of debt.

Solution Preview

15. Cost of Debt. Olympic sports has two issues of debt outstanding. One is a 9 percent coupon bond with a face value of $20 million, a maturity of 10 years, and a yield to maturity of 10 percent. The coupons are paid annually, and a coupon rate 10 percent. The face value of the issue is $25 million, and issue ...

Purchase this Solution
Free BrainMass Quizzes
Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

View More Free Quizzes
Related BrainMass Solutions

  • Olympic Sports: Issues of Debt Outstanding

    What is the before-tax cost of debt for Olympic Sports? b. What is Olympic's after-tax cost of debt? a. What is the before-tax cost of debt for Olympic Sports? b. What is Olympic's after-tax cost of debt?

  • Debt for Olympic Sports

    What is Olympic's after-tax cost of debt? Tax Rate 35% After tax cost of debt FORMULA a. What is the before-tax cost of debt for Olympic? b. What is Olympic's after-tax cost of debt? Please see attached file.

  • After tax cost of debt

    of an example Tax rate = 30% (or in decimals 0.3) After tax cost of debt = Before tax cost of debt x (1-Tax rate) = 7% x (1-0.3) = 4.9% Tax rate = 50% (or in decimals 0.5) After tax cost of debt = Before tax cost of debt x (1-Tax rate) = 7% x (

  • Preferred Stock, WACC, and Cost of Debt

    Then the firm's after-tax cost of debt will equal its before-tax cost of debt. Why?

  • Barbow Enterprise Accounting

    After-tax weighted average cost of capital: Cost of common equity=15% Equity ratio=Equity/Asset=3456/5760=60% Before tax cost of debt=12% After tax cost of debt=(1-tax rate)*before tax cost of debt=(1-40%)*12%=7.2% Debt ratio=Debt/Asset=2304/5760

  • Cost of Capital

    We are given that cost of equity is 22%. Before tax cost of debt is 13%. Tax rate is 40% and debt to equity ratio is 45%. The first thing is to calculate the after tax cost of debt. The after tax cost of debt is before tax cost X (1-taxrate).

  • Before and after tax cost of debt

    361819 Before and after tax cost of debt Assume that Dell issued 30-year bonds, 8% coupon rate, semiannual, 7 years ago. The bond currently sells for 108% of face value. The company's tax rate is 35%. 1. What is the pretax cost of debt? 2.

  • How do you calculate the WACC based on the target capital structure?

    Step 1: Calculate the after tax cost of debt Marginal Tax rate T = 40% Pre tax cost of debt= kd= 10.00% After tax cost of debt= kd(1-T)= 6.000% =(100% -40.%)*10.% After tax cost of debt is taken as

  • Discounting unlevered cash flows, cost of debt, WACC

    b. adding the weighted average before tax cost of debt to the weighted average cost of equity. c. adding the weighted average after tax cost of debt to the weighted average cost of equity.

View More Related Solutions