Company B has $50 million of bonds outstanding (face value). These are 10-year bonds, and they are currently selling at 98% of par. The annual coupon rate on the bond issue is 4%. What would be Company B’s before-tax component cost of debt? If company B has a tax-rate of 25%, what is their after-tax cost of debt?

Company B has $50 million of bonds outstanding (face value). These are 10-year bonds, and they are currently selling at 98% of par. The annual coupon rate on the bond issue is 4%. What would be Company B’s before-tax component cost of debt? If company B has a tax-rate of 25%, what is their after-tax cost of debt?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 2P

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