Calculate the approximate yield-to-maturity of the bonds, Ask an Expert

Finance

Bakersfield Company wants to issue discount bonds with a market value equal to 60% of their face value. The bonds will carry 6% coupon, paying interest semiannually, and they will mature after 10 years. The income tax rate of Bakersfield is 35%.

(A) find out the approximate yield-to-maturity of the bonds, and then the after-tax cost of debt for Bakersfield.

(B) Using the concept of original issue discount, prepare an equation that would give the after-tax cost of debt for Bakersfield. How do you solve this equation by using Excel?

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Category:- Basic Finance
Reference No.:- M950390

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