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Category > Business & Finance Posted 03 Jun 2017 My Price 12.00

The cost of debt Gronseth Drywall Systems, Inc.

The cost of debt Gronseth Drywall Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each case, the bonds will have a $1,000 par value and flotation costs will be $30 per bond. The company is taxed at a rate of 40%. Calculate the after-tax cost of financing with each of the following alternatives.

 

Coupon

Time to

Premium or

Alternative

rate

maturity (years)

discount

A

9%

16

$250

B

7

5

50

C

6

7

par

D

5

10

-75

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Status NEW Posted 03 Jun 2017 11:06 AM My Price 12.00

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