Jiminys cricket farm issued a 30-year 86 percent semiannual, Ask an Expert

Finance

Jiminy's Cricket Farm issued a 30-year, 8.6 percent semiannual bond 6 years ago. The bond currently sells for 90 percent of its face value. The company’s tax rate is 38 percent.

a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Pretax cost of debt %

b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Aftertax cost of debt %

c. Which is more relevant, the pretax or the aftertax cost of debt?

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Financial Management, Finance

Category:- Financial Management
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