Jiminy’s Cricket Farm issued a 25-year, 5 percent semiannual coupon bond 6 years ago. The bond currently sells for 106 percent of its face value. The company’s tax rate is 25 percent. What is the company’s pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What is the company’s aftertax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.
Jiminy’s Cricket Farm issued a 25-year, 5 percent semiannual coupon bond 6 years ago. The bond currently sells for 106 percent of its face value. The company’s tax rate is 25 percent. What is the company’s pretax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What is the company’s aftertax cost of debt? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 17P
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Jiminy’s Cricket Farm issued a 25-year, 5 percent semiannual coupon bond 6 years ago. The bond currently sells for 106 percent of its face value. The company’s tax rate is 25 percent.
-
What is the company’s pretax cost of debt?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
-
What is the company’s aftertax cost of debt?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
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