Jiminys Cricket Farm issued a 30-year, 6.3 percent semiannual bond eight years ago. The bond currently sells
Question:
Jiminy’s Cricket Farm issued a 30-year, 6.3 percent semiannual bond eight years ago. The bond currently sells for 110 percent of its face value. The company’s tax rate is 22 percent.
a. What is the pretax cost of debt?
b. What is the aftertax cost of debt?
c. Which is more relevant, the pretax or the aftertax cost of debt? Why?
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a The pretax cost of debt is the YTM of the companys bonds so P 0 1...View the full answer
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Related Book For
Essentials of Corporate Finance
ISBN: 978-1260013955
10th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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