A company has Rs.500,000 of debt outstanding with a coupon rate of 10%. The yield to maturity on these bonds is 15%. If the rate of tax is 40%, what is the company’s after-tax cost of debt?
In case of a redeemable long term debt, the cost of debt is the investor’s yield to maturity adjusted by the firm’s tax rate. The question of yield to maturity arises only when the loan is taken either at discount or at premium. As such, the YTM is considered as cost of debt here and not the coupon rate. Therefore, the after-tax cost is: 15% * (1- 40%) = 0.09 ~ 9%
In an objective type test of 90 questions, 5 marks are allotted for every correct answer and 2 marks are deducted for every wrong answer. After attempt...
Consider the Ouestion and two Statements given below :
Question : Is x an integer?
Statement-1 : x/3 is not an integer.
Stat...
A man started from home at 14:30 hours and drove to village, arriving there when the village clock indicated 15:15 hours. After staying for 25 minutes,...
Consider the following statements:
1. Between 3:16 p.m. and 3:17 p.m., both hour hand and minute hand coincide.
2. Between 4:58 p.m. ...
The sum of three consecutive integers is equal to their product. How many such possibilities are there?
A biology class at high school predicted that a local population of animals will double in size every 12 years. The population at the beginning of the ...
In a group of 120 persons, 80 are Indians and rest are foreigners. Further, 70 persons in the group can speak English. The number of Indians who can sp...
X said to Y, "At the time of your birth I was twice as old as you are at present." If the present age of X is 42 years, then consider the following sta...
Consider the following statements :
1. The sum of 5 consecutive integers can be 100.
2. The product of three consecutive ...
Consider the following addition problem :
3P + 4P + PP + PP = RQ2; where P, Q and R are different digits.
What is the arithmetic mean...
