For each of the callable bond issues in the following table, calculate the after-tax cost of calling the issue.
Each bond has a $1,000 par value, and the various issue sizes and call prices are shown in the following table. The firm is in the 40 percent tax bracket.
|
Bond
|
Size of issue
|
Call Price
|
|
A
|
12,000 bonds
|
$1,050
|
|
B
|
20,000
|
1,030
|
|
C
|
30,000
|
1,015
|
|
D
|
50,000
|
1,050
|
|
E
|
100,000
|
1,045
|
|
F
|
500,000
|
1,060
|