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A company issued a 25 year, 6.8 percent semiannual bond 8 years ago. The bond sells today for 110 percent of its face value. The tax rate is 40%.

A company issued a 25 year, 6.8 percent semiannual bond 8 years ago. The bond sells today for 110 percent of its face value. The tax rate is 40%.

  1. What is the pretax cost of debt?
  2. What is the after-tax cost of debt?
  3. Which is more relevant, the pretax or the after-tax cost of debt? Why?

Top Answer

1 pretax cost of debt = 5.86% 2 After tax cost of debt... View the full answer

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Other Answers

Pretax cost of debt= 5.9 % Cost of debt after tax= 3.54 % Cost of... View the full answer

a 6.134% b 3.68% c Post tax cost... View the full answer

1 comment
  • I took 50-8 yr calculation by mistake. Please ignore
    • payaljain3
    • May 03, 2018 at 1:04pm

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