A company is going to issue a 1,000 par value bond that pays a 7 ...

[renzo156]

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.

[Alyson.hiatt@yahoo.com]

Answer to Question 1

a. YTM = 7.57
b. After-tax cost of existing debt = 7.57  (1 - .

Answer to Question 2

A

[renzo156]

YES! Correct, THANKS for helping me on my review

[carojassy25]

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