The Coca-Cola Company is planning to issue debt that will mature in 2093. In many respects, the issue is similar to the currently outstanding debt of the corporation.
a. Using Table 11-3, identify the yield to maturity on similarly outstanding debt for the firm in terms of maturity.
b. Assume that because the new debt will be issued at par, the required yield to maturity will be 0.15 percent higher than the value determined in part a. Add this factor to the answer in a. (New issues sold at par sometimes require a slightly higher yield than older seasoned issues because there are fewer tax advantages and more financial leverage that increase company risk.)
c. If the firm is in a 25 percent tax bracket, what is the after tax cost of debt?