Compute for the approximate after tax-cost of debt.

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter3: The Financial Environment: Markets, Institutions And Investment Banking
Section: Chapter Questions
Problem 14PROB
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Part 1:

The company has a P1,000 par value bond outstanding with 25 years to maturity. The bond carries an annual interest payment of P88 and is currently selling for P925. The company is in a 30% tax bracket. Compute for the approximate after tax-cost of debt. (Round off to two decimal places between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%) 

subpart : 

the company's common stock has a beta, β, of 1.2. The risk-free rate is 6%, and the market return is 11%. With the following given, the corporation estimates the cost of common stock equity, rs, to be? (Round off to two decimal places between computations. Round off the final answer to two decimal places. Example of writing your answer 2.58%)

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