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 |

Step 1

**Calculation of After-tax Cost of Debt:**

The after-tax cost of debt is **4.48%**.

**Excel Spreadsheet:**

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