Problemsuppose a company will issue new 25-year debt with a, Ask an Expert

Accounting

Problem:

Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 10%, paid annually. The tax rate is 35%.

Requirement:

Question: If the flotation cost is 5% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs.

Note: Please show basic calculation

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167067

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