Jiminys Cricket Farm issued a 30-year, 8 percent semiannual bond 7 years ago. The bond currently sells
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Jiminy’s Cricket Farm issued a 30-year, 8 percent semiannual bond 7 years ago. The bond currently sells for 95 percent of its face value. The company’s tax rate is 35 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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To calculate the pretax cost of debt we need to determine the yield to maturity YTM of the bond a Pr...View the full answer
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Related Book For
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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