Lugget Corp. has one bond issue outstanding with an annual coupon of 4.4%, a face value of $1,000 and a price of $1,119.42, which matures in 10 years. The company's tax rate is 30%. 1. What is Lugget's pre-tax cost of debt? 2. What is the company's after-tax cost of debt?
Lugget Corp. has one bond issue outstanding with an annual coupon of 4.4%, a face value of $1,000 and a price of $1,119.42, which matures in 10 years. The company's tax rate is 30%. 1. What is Lugget's pre-tax cost of debt? 2. What is the company's 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 14P
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Lugget Corp. has one bond issue outstanding with an annual coupon of 4.4%, a face value of $1,000 and a price of $1,119.42, which matures in 10 years. The company's tax rate is 30%.
1. What is Lugget's pre-tax cost of debt?
2. What is the company's after-tax cost of debt?
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