Ying Import has several bond issues outstanding, each making semiannual interest
ID: 2765123 • 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 40 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
Market value weight = market value / total market value * 100
YTM = [Annual Interest + (Par Value - Market value) / n] / Par Value + Market Value / 2
Bond 1 = 2024000 + (23000000 - 24219000)/ 4 / (23000000 + 24219000)/2 = 7.28%
Bond 2= 2795000 + (43000000 - 40893000)/ 4 / (43000000 + 40893000)/2 = 7.38%
Bond 3= 4080000 + (48000000 - 49968000)/ 4 / (48000000 + 49968000)/2 = 8.05%
Bond 4= 5670000 + (63000000 - 66780000)/ 4 / (63000000 + 66780000)/2 = 8.49%
Cost of debt = 8.8 * 13.32% + 6.5 * 22.49% + 8.5 * 27.48% + 9 * 36.72% = 8.27%
Bond Face Value(A) Price Quote(B) Market Value (A*B) 1 23000000 105.3 24219000 2 43000000 95.1 40893000 3 48000000 104.1 49968000 4 63000000 106 66780000Related Questions
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