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Builtrite Furniture is considering sells bonds for a plant expansion. Currently, Builtrite believes that it could sell 15-year maturity, $1000 par value, 5 3/4% coupon bonds after flotation costs for $1015. If Builtrite is in the 34% marginal tax bracket, what is the after-tax cost for the bonds?

Respuesta :

Karabo99

Answer:

The after-tax cost for the bonds is 3.69%

Explanation:

The single formula for after-tax cost of debt for the bond is calculated using the Excel's RATE function as follows:

= rate(nper,pmt,pv,fv)

= rate(15,5.75%*1000,-1015,1000)*(1 - 0.34)

= 3.69%

Therefore, The after-tax cost for the bonds is 3.69%

jayilych4real

If Builtrite is in the 34% marginal tax bracket, The after-tax cost for the bonds is 3.69%

Calculations and Parameters:

The single formula for after-tax cost of debt for the bond is calculated as follows:

  • = rate(nper,pmt,pv,fv)
  • = rate(15,5.75%*1000,-1015,1000)*(1 - 0.34)
  • = 3.69%

Therefore, The after-tax cost for the bonds is 3.69%

Read more about marginal tax here:
https://brainly.com/question/27025222

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