2156685View Finance for Managers MGT-325-OLO1 Nathan Evans | 9/24/18 3:10 P. Hom

Question

2156685View Finance for Managers MGT-325-OLO1 Nathan Evans | 9/24/18 3:10 P. Homework: Assignment 5 Score: 0 of 10 pts P9-3 (similar to) Sa 41 of 10 (0 complete) HW Score: 0%, 0 of 100 Question Help cost of debt and after-dax cost of debt Personal Finance Problem David Abbot is intorested in purchasing a bond issued by Sony. He has obtained the following information on the security Sony Bond Par value $1000 Coupon ne restate 80% Cost $910 Years to matunity 10 Corporate tax rate 35% Answer the following questions a. Calculate the before-tax cost of the Sony bond using the bond's yield to maturity (YTM) b. Calculate the after-tax cost of the Sonv bond aiven the corporate tax rate a. The before tax cost of the Sony bond sig te bond's yield to maturity (YTM) S (Rond to two decinal places) %. Enter your answer in the answer box and then click Check Answer

Explanation / Answer

a.

For before-tax cost of YTM, use excel function=RATE(nper,pmt,pv,fv)

before-tax cost of YTM=RATE(10,1000*8%,-910,1000)=9.43%

b.

after tax cost of bond=9.43%*(1-35%)=6.13%

the above is answer..

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