Buchanan corp. is refunding $10 million worth of 10% debt. the new bonds will be issued for 8%. The corporation's tax rate is 35

Question

swat32

3 years ago

8

Buchanan corp. is refunding $10 million worth of 10% debt. the new bonds will be issued for 8%. The corporation's tax rate is 35

%. The call premium is 9% what is the net cost of the call premium after taxes?

Mathematics

1 answer:

Alik [6] · Answer 1 · 2022-07-23T11:30:42+03:00

The net cost of call premium can be calculated considering the total amount after taxes deductions times the percentage of the call premium.

Writing the percentage as a decimal number, we get:

10000000 × (1 - 0.35) × 0.09 = 585000

The <span>net cost of the call premium after taxes is 585000$.</span>