Waller, Inc., is trying to determine the cost of your debt. The company has an outstanding debt issue with a 15-year maturity that is trading at 106 percent of face value. The issue makes semi-annual payments and has an implicit cost of 9 percent per year. Please note that the integrated cost refers to the coupon rate.

Required:

(a) What is the company's pre-tax cost of debt? (Do not round your intermediate calculations.)


(b)

If the tax rate is 36 percent, what is the after-tax cost of debt? (Do not round your intermediate calculations.)

Answer rating: 100% (QA)

solution a To calculate the pretax cost of debt we need to first calculate the bonds yield to maturity YTM Since the bond is trading at a premium 106 ... View the full answer