Check my work Problem 12-3 Calculating Cost of Debt Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 6 percent 3 years ago. The bond currently sells for 92 percent of its face value. The company's tax rate is 35 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations. 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. 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? Aftertax cost of debt O Pretax cost of debt
Check my work Problem 12-3 Calculating Cost of Debt Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 6 percent 3 years ago. The bond currently sells for 92 percent of its face value. The company's tax rate is 35 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations. 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. 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? Aftertax cost of debt O Pretax cost of debt
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Problem 12-3 Calculating Cost of Debt
Suspect Corp. issued a bond with a maturity of 30 years and a semiannual coupon rate of 6 percent 3 years ago. The bond currently
sells for 92 percent of its face value. The company's tax rate is 35 percent.
a. What is the pretax cost of debt? (Do not round intermediate calculations. 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. 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?
Aftertax cost of debt
O Pretax cost of debt
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