The after-tax cost of debt.

Question

Husky Enterprises recently sold an issue of 13-year maturity bonds. The bonds were sold at a deep discount price of $495 each. After flotation costs, Husky received $479.49 each. The bonds have a $1,000 maturity value and pay $45 interest at the end of each year. Compute the after-tax cost of debt for these bonds if Husky’s marginal tax rate is 40 percent. Use Table II and Table IV to answer the question. Round your answer to one decimal place.

Answer 1

Question

Chapter 12, Problem 2P

Summary Introduction

To determine: The after-tax cost of debt.

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Husky Enterprises recently sold an issue of 13-year maturity bonds. The bonds were sold at a deep discount price of $495 each. After flotation costs, Husky received $479.49 each. The bonds have a $1,000 maturity value and pay $45 interest at the end of each year. Compute the after-tax cost of debt for these bonds if Husky’s marginal tax rate is 40 percent. Use Table II and Table IV to answer the question. Round your answer to one decimal place.

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