Calculating Cost of Debt Shanken NV issued a 30-year, 10 per cent semi-annual bond 7 years ago.

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Calculating Cost of Debt Shanken NV issued a 30-year, 10 per cent semi-annual bond 7 years ago. The bond currently sells for 108 per cent of its face value. The company’s tax rate is 35 per cent. Assume the face value of the debt is €1,000.

(a) What is the pre-tax cost of debt?

(b) What is the after-tax cost of debt?

(c) Which is more relevant, the pre-tax or the after-tax cost of debt? Why?

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Fundamentals Of Corporate Finance

ISBN: 9780077178239

3rd Edition

Authors: David Hillier, Iain Clacher, Stephen A. Ross

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Question Posted: Jul 08, 2024 10:01 AM

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Calculating Cost of Debt Shanken NV issued a 30-year, 10 per cent semi-annual bond 7 years ago.

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Fundamentals Of Corporate Finance

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