ABC Co. can issue P1,000 par value bond that pays P100 per year in interest at a price of P980. The bond will have a 5-year life. The firm is in a 35% tax bracket. What is the after-tax cost of debt? A 5.87% B. 6.8% C. 9.03% D. 9.14%

ABC Co. can issue P1,000 par value bond that pays P100 per year in interest at a price of P980. The bond will have a 5-year life. The firm is in a 35% tax bracket. What is the after-tax cost of debt? A 5.87% B. 6.8% C. 9.03% D. 9.14%

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 2EA: Beluga Inc. issued 10-year bonds with a face value of $100,000 and a stated rate of 3% when the...

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

ABC Co. can issue P1,000 par value bond that pays P100 per year in interest at a price of P980.
The bond will have a 5-year life. The firm is in a 35% tax bracket. What is the after-tax cost of debt?
A. 5.87%
B. 6.8%
C. 9.03%
D. 9.14%

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