21 May WHAT IS THE BEFORE-TAX COST OF CAPITAL FOR THIS DEBT FINANCING?
Homework 6E
Before-Tax cost of debt financing
Question 1 1
/ 1 point
Black Hill Inc. sells $100 million worth of 20-year to
maturity 13.12% annual coupon bonds. The net proceeds (proceeds after flotation
costs) are $981 for each $1,000 bond. What is the before-tax cost of capital
for this debt financing?
Round the answer to two decimal places in percentage form.
(Write the percentage sign in the “units” box)
You should use Excel or financial calculator.
After-Tax cost of debt financing
Question 2 1
/ 1 point
Great Seneca Inc. sells $100 million worth of 25-year to
maturity 6.93% annual coupon bonds. The net proceeds (proceeds after flotation
costs) are $975 for each $1,000 bond. The firm’s marginal tax rate is 35%. What
is the after-tax cost of capital for this debt financing?
Round the answer to two decimal places in percentage form.
(Write the percentage sign in the “units” box)
You should use Excel or financial calculator.
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