Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax rate is 34 percent, what is the aftertax cost of Ying's debt?   BondCoupon RatePrice QuoteMaturityFace Value16.4%     100     3 years       $ 18,000,000   27.4        107     6 years       39,000,000   36.7        97     19 years       46,000,000   47.8        107     31 years       64,000,000

Question
Asked Dec 16, 2019
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Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax rate is 34 percent, what is the aftertax cost of Ying's debt? 

  

Bond

Coupon Rate

Price Quote

Maturity

Face Value

1 6.4%      100      3 years        $ 18,000,000   
2 7.4         107      6 years        39,000,000   
3 6.7         97      19 years        46,000,000   
4 7.8         107      31 years        64,000,000   
 

 

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Expert Answer

Step 1

Calculation of After-tax Cost of Debt:

The after-tax cost of debt is 4.48%.

Excel Spreadsheet:

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