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Unformatted text preview: 7% Pretax cost of debt? Aftertax cost of debt? Premium Rate (Face value * quoted percentage) 1000*0.07 70 Cost of Debt = Premium Rate * (1- (1/1+r)^t)/r+(fv/(1+r)^t) Cost of Debt = 70 * ((1-1/(1.0626)^15)0.07+1000/(1.07)^15) Cost of Debt Determined by trial and error Cost of Debt (before tax) 6.26% Cost of Debt (after-tax) Cost of Debt (pre-tax) * (1 -tax rate) 0.0626 * (1-0.35) 4.07%...
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This note was uploaded on 05/24/2011 for the course FINANCE 101 taught by Professor Smith during the Spring '11 term at Harvard.
- Spring '11