Bonds

Bristol Myers Squibb, an international pharmaceutical company, is initiating a new project for which it requires $2.5 million in debt capital. The current plan is to sell20-year bonds that pay 4.2% per year, payable quarterly, at a 3% discount on the face value. BMS has an effective tax rate of 35% per year.

Determine (a) the total face value of the bonds required to obtain $2.5 million and (b) the effective annual after-tax cost of debt capital.

Don't use plagiarized sources. Get Your Custom Essay on
Bonds
Just from $13/Page
Order Essay

To understand the advantage of debt capital from a tax perspective in the United States, determine the before-tax and after-tax weighted average costs of capital if a project is funded 40%-60% with debt capital borrowed at 9% per year. A recent study indicates that corporate equity funds earn 12% per year and that the effective tax rate is 35% for the year.

Place Order
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Grab A 14% Discount on This Paper

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.