Jiminy's Cricket Farm issued a 30-year, 6 percent semiannual bond 4 years ago. The bond currently sells for 95 percent of its face value. The company's tax rate is 35 percent.
a. What is the pretax cost of debt? (Do not round intermediate calculation and round your answer to 2 decimal places.
Cost of debt = ____%
b. What is the aftertax cost of debt? (Do not round intermediate calculations and round your answer to 2 decimal places.
Cost of debt = _____ %
c. Which is more relevant, the pretax or the aftertax cost of debt?
Jiminy's Cricket Farm issued a 30-year, 6 percent semiannual bond 4 years ago. The bond currently sells for 95 percent of its face value. The company's tax rate is 35 percent.
a. What is the pretax cost of debt? (Do not round intermediate calculation and round your answer to 2 decimal places.
Cost of debt = ____%
b. What is the aftertax cost of debt? (Do not round intermediate calculations and round your answer to 2 decimal places.
Cost of debt = _____ %
c. Which is more relevant, the pretax or the aftertax cost of debt?
Related questions
| Jiminyâs Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 95 percent of its face value. The companyâs tax rate is 35 percent. |
| a. | What is the pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Pretax cost of debt | % |
| b. | What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Aftertax cost of debt | % |
| c. | Which is more relevant, the pretax or the aftertax cost of debt? | ||||
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