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Keyspan corp

Finance Jun 23, 2021

Keyspan corp. is planning to issue debt that will mature in 2030. In many respects, the issue is similar to the currently outstanding debt of the corporation. Use Table 11-3. 
a. Calculate the yield to maturity on similarly outstanding debt for the firm in terms of maturity. (Input your answer as a percent 
rounded to 2 decima 
Yield 
I places.) 
Assume that because the new debt will be issued at par, the required yield to maturity will be 0.25 percent higher than the value determined in part a. 
b. What is the new yield to maturity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) 
Yield 
c. If the firm is in a 25 percent tax bracket, what is the aftertax cost of debt for the yield determined in part b? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) 
Aftertax cost of debt 

Expert Solution

a) Yield to Maturity:

Yield to Maturity = 4.35% (SEE TABLE, SEE MATURITY 2030)

 

 

b) New Yield to Maturity:

 New Yield to Maturity = 4.35% + 0.25% = 4.60%

 

 

c) After-tax Cost of Debt:

After-tax Cost of Debt = 4.60%*(1-0.25)  = 3.45% 

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