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    Ying Import bond issues- after tax cost of debt

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    Ying Import has several bond issuances outstanding, each making semiannual interest payments. The bonds are listed in table attached. If the corporate tax rate is 34%, what is the aftertax cost of Ying's debt?

    Coupon Price Face
    Bond Rate Quote Maturity Value
    1 8.00% $106.38 5 years 10,000,000
    2 7.50% $98.00 8 years 45,000,000
    3 6.40% $82.00 15 ½ years 35,000,000
    4 9.75% $101.50 25 years 45,000,000

    See data on attached spreadsheet

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    Solution Preview

    The solution is in the attached spreadsheet

    Ying Import
    Coupon Price Face No of bonds= Face value/ 100) Market value= No of bondsX Price quote Weightage= Market value/ Total value Cost of debt Weigtage X Cost of debt
    Bond Rate Quote Maturity Value
    1 8.00% $106.38 5 ...

    Solution Summary

    The solution calculates the after tax cost of debt. The company has issued a number of bonds with different maturities and coupon rates. First the yield to maturity (YTM) of these bonds is calculated and then the weighted average yield is calculated. Using the tax rate, after tax cost of debt is calculated.