Jiminys cricket farm issued a 30-year 65 percent semiannual, Ask an Expert

Finance

Jiminy's Cricket Farm issued a 30-year, 6.5 percent semiannual bond 7 years ago. The bond currently sells for 107 percent of its face value. The company's tax rate is 35 percent.

a. What is the pretax cost of debt?

b. What is the aftertax cost of debt?

c. Which is more relevant, the pretax or the after tax cost of debt? Why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91569663

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