Jiminy's Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 6 percent 3 years ago. The bond currently sells for 103 percent of its face value. The company's tax rate is 22 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt b. Aftertax cost of debt % %
Jiminy's Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 6 percent 3 years ago. The bond currently sells for 103 percent of its face value. The company's tax rate is 22 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Pretax cost of debt b. Aftertax cost of debt % %
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 14P
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