Ask Question
5 January, 05:45

The June Bug has a $340,000 bond issue outstanding. These bonds have a coupon rate of 6.25 percent, pay interest semiannually, and sell at 101.2 percent of face value. The tax rate is 35 percent. What is the amount of the annual interest tax shield?

+3
Answers (1)
  1. 5 January, 07:04
    0
    the amount of the annual interest tax shield = $7437.5

    Explanation:

    First we need to ckeck the vaelus given on the problem.

    $340,000 bond issue outstanding

    rate of 6.25%

    sell at 101.2% of face value

    tax rate is 35 percent

    pay interest semiannually

    so the amount of the annual interest tax shield will be given by:

    Coupon amount paid in a year = $340000 x 6.25 / 100 = $21250

    amount of the annual interest tax shield = $21250 x 35 / 100 = $7437.5

    therefore we have that the amount of the annual interest tax shield is $7437.5
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The June Bug has a $340,000 bond issue outstanding. These bonds have a coupon rate of 6.25 percent, pay interest semiannually, and sell at ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers