Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 8 percent annual interest and matures

Question:

Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 8 percent annual interest and matures in 15 years. Investors are willing to pay $950 for the bond and Temple faces a tax rate of 35 percent. What is Temple’s after-tax cost of debt on the bond where interest is paid semiannually?

Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...