Ying Import has several bond issues outstanding, each making semiannual interest
ID: 2748889 • Letter: Y
Question
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below.
What is the market value of each of the company's bonds? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
What is the market value weight of each of the company's bonds? (Round your answers to 4 decimal places (e.g., 32.1616).)
What is the YTM of each of the company's bonds? (Input your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
If the corporate tax rate is 30 percent, what is the aftertax cost of the company’s debt? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below.
Explanation / Answer
Bond coupon interest maturity Annunity factor Face value PV factor PV of interest PV of face value Market value of bond market value weight 1 8.60% 1,720,000 6 4.3553 20,000,000 0.56447 7,491,116 11,289,400 18,780,516 0.1396 2 6.60% 2,508,000 9 5.759 38,000,000 0.4241 14,443,572 16,115,800 30,559,372 0.2272 3 8.30% 3,569,000 16.5 7.92265 43,000,000 0.2077 28,275,938 8,931,100 37,207,038 0.2766 4 8.80% 5,104,000 26 9.1609 58,000,000 0.0211 46,757,234 1,223,800 47,981,034 0.3567 134,527,959 1.0000 YTM calculation Bond YTM 1 coupon C FV Price n (F-p)/n C+ (F-p)/n (F+P)/2 (C+ (F-p)/n)/(F+P)/2 8.60% 8.60 100 106.1 6 -1.017 7.58 103.05 7.36% 6.60% 6.60 100 94.3 9 0.633 7.23 97.15 7.45% 8.30% 8.30 100 104.9 16.5 -0.297 8.00 102.45 7.81% 8.80% 8.80 100 94.7 26 0.204 9.00 97.35 9.25% After tax cost of debt coupon 1-t after tax interest weights weight*after tax interest 8.60% 0.7 0.0602 0.1396 0.84% 6.60% 0.7 0.0462 0.2272 1.05% 8.30% 0.7 0.0581 0.2766 1.61% 8.80% 0.7 0.0616 0.3567 2.20% After tax cost of debt 5.69%
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