DuPont reports in a recent balance sheet $1,383 million of 6.00 percent notes payable due in 2018.

Question:

DuPont reports in a recent balance sheet $1,383 million of 6.00 percent notes payable due in 2018. The company’s income tax rate is approximately 20 percent.

a. Compute the company’s after-tax cost of borrowing on this bond issue stated as a total dollar amount.

b. Compute the company’s after-tax cost of borrowing on this bond issue stated as a percentage of the amount borrowed.

c. Describe briefly the advantage of raising funds by issuing bonds as opposed to stocks.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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