A company is going to issue a 1,000 par value bond that pays a 7 annual coupon. The company expects
investors to pay 942 for the 20-year bond. The expected flotation cost per bond is 42, and the firm is in the
34 tax bracket.
Compute the following:
a. the yield to maturity on the firm's bonds
b. the firm's after-tax cost of existing debt
c. the firm's after-tax cost of new debt
Question 2
The break-even point is equal to
A) fixed costs divided by (sales price per unit - variable cost per unit).
B) fixed costs divided by selling price per unit.
C) (sales price per unit - variable cost per unit) times the fixed costs.
D) fixed costs divided by unit variable costs.