russell container corporation has a $1 000 par value bond outstanding with 30 ye

Question

russell container corporation has a $1 000 par value bond outstanding with 30 years to maturity. The bond carries an annual interest payment of $105 and is currently selling $880 per bond. A. Compute the yield to maturity on the old issue and use this as the yield for the new issue. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Yield on new issue % : ____ b. Make the appropriate tax adjustment to determine the aftertax cost of debt.(Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Aftertax cost of debt % : ____

Explanation / Answer

YTM= (C+ F-P/n)/ (F+P)/2

      = {105 + (1000-880)30}/ (1000+880)/2

     = 109 /940 = 11.59%

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