Before tax cost of debt calculator

    • [DOC File]Chapter 10

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      The after-tax cost of debt, rd(1 - T), is the relevant cost to the firm of new debt financing. Since interest is deductible from taxable income, the after-tax cost of debt to the firm is less than the before-tax cost. Thus, rd(1 - T) is the appropriate component cost of debt (in the weighted average cost of capital). b.

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      If new debt is used to refund old debt, the correct discount rate to use in the refunding analysis is the before-tax cost of new debt. b. The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity.

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    • [DOC File]Exam-type questions

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      a. The after-tax cost of debt is generally cheaper than the after-tax cost of equity. * b. Since retained earnings are readily available, the cost of retained earnings is generally lower than the cost of debt. c. The after-tax cost of debt is generally more expensive than the before-tax cost of debt. d. Statements a and c are correct. 8.

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    • [DOC File]Chapter 9

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      Since this is a semiannual rate, multiply by 2 to find the annual rate, rd = 10%, the pre-tax cost of debt. Since interest is tax deductible, Uncle Sam, in effect, pays part of the cost, and Coleman’s relevant component cost of debt is the after-tax cost: rd(1 – T) = 10.0%(1 – 0.40) = 10.0%(0.60) = 6.0%. Optional Question. Should you use ...

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    • [DOC File]Chapter 7

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      a. The after-tax cost of debt is generally cheaper than the after-tax cost of equity. * b. Since retained earnings are readily available, the cost of retained earnings is generally lower than the cost of debt. c. The after-tax cost of debt is generally more expensive than the before-tax cost of debt. d. Statements a and c are correct. 18.

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    • [DOC File]1) Calculate the after-tax cost of a $25 million debt ...

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      Sep 13, 2008 · The cost of retained earnings is 18 percent. The firm can raise preferred stock at a cost of 15 percent. First mortgage bonds can be sold at a pretax cost of 14 percent. The firm’s marginal tax rate is 40 percent. Calculate the cost of capital for the fund needed to meet the expansion goal. ki = kd (1 - T) = (14%)(1 - 0.4) = 8.4%

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    • [DOC File]Iowa State University

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      Its before tax cost of debt is 10% and its marginal tax rate is 35%. The current stock price is $32.50 and they just paid a dividend of $3.00. It is expected to grow at a constant rate of 6.5%.

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    • [DOC File]CHAPTER 3

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      tax savings 1,600. Sunk cost $ 2,400. 13-2 (a) $2,000 (1 - .46) = $1,080 (b) If the machine is sold before it is fully depreciated, the tax treatment is different. Initial cost of the machine $14,000. Less: accumulated depreciation 4,000. Book value of the machine $10,000. Market value of the machine $13,000. Less: book value of the machine 10,000

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    • [DOC File]Chapter 14—Capital Budgeting - CPA Diary

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      26. The pre-tax cost of capital is higher than the after-tax cost of capital because. a. interest expense is deductible for tax purposes. b. principal payments on debt are deductible for tax purposes. c. the cost of capital is a deductible expense for tax purposes. d. dividend payments to stockholders are deductible for tax …

      cost of debt formula excel


    • [DOC File]Cost of Capital, Instructor's Manual

      https://info.5y1.org/before-tax-cost-of-debt-calculator_1_37c0ac.html

      The after-tax cost of debt, rd(1 - T), is the relevant cost to the firm of new debt financing. Since interest is deductible from taxable income, the after-tax cost of debt to the firm is less than the before-tax cost. Thus, rd(1 - T) is the appropriate component cost of debt (in the weighted average cost of capital). b.

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