DEBT: The firm can sell a 12‑year, 7%, P1,000 par value share for Php 960. A flotation cost of 2% of the face value would be required upon the issuance of the bond. Additionally, the firm's marginal tax rate is 40 percent. *Using the approximation method, what is the after-tax cost of debt?

DEBT: The firm can sell a 12‑year, 7%, P1,000 par value share for Php 960. A flotation cost of 2% of the face value would be required upon the issuance of the bond. Additionally, the firm's marginal tax rate is 40 percent. *Using the approximation method, what is the after-tax cost of debt?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 2P

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*Using the approximation method, what is the after-tax cost of debt?

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