Keyspan corp. is planning to issue debt that will mature in 2,030. In many respe

Question

Keyspan corp. is planning to issue debt that will mature in 2,030. In many respects, the issue is similar to the currently outstanding debt of the corporation. Use Table 11-3 a. Calculate the yield to maturity on similarly outstanding debt for the firm, in terms of maturity. (Input your answer as a percent rounded to 2 decimal places.) Assume that because the new debt wil be issued at par, the required yield to maturity will be .15 percent higher than the value determined in part a b. What is the new yield to maturity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) C. places.) Atertax cost of debt

Explanation / Answer

a)

YTM = 4.57%

b)

YTM = 4.57% + 0.15% = 4.72%

c)

After tax cost = YTM*(1-tax rate)

   = 4.72%*(1-40%)

= 2.83%

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