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Answer the following question:

Question 1: The coupon rate on an issue of debt is 12%. The yield to maturity on this issue is 14%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?

4.34%
3.72%
9.66%
8.28%

2. The coupon rate on a debt issue is 12%. If the yield to maturity on the debt is 9.33%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 34%?

3.17%
4.08%
6.16%
7.92%

Explain comprehensively and show all workings.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147103

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