ABC Company has publicly traded $1,000 par value, 5% semiannual coupon bonds which mature in 18...

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ABC Company has publicly traded $1,000 par value, 5% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $1045. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABC's common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The company's average tax rate is 30%. What is this company's after-tax cost of debt? ABC Company has publicly traded $1,000 par value, 5% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $1045. The company also has preferred stock with a $70 par and 6% annual dividend. The market has priced the preferred stock at $89. ABC's common stock has a beta of 1.5. You estimate the risk-free rate to be 3% and the required return on the market to be 14%. The company's average tax rate is 30%. What is this company's after-tax cost of debt?

Answer rating: 100% (QA)

The aftertax cost of debt can be calculated using the following formula AfterTax Cost of De... View the full answer