Jiminys Cricket Farm issued a 30-year, 9 percent semiannual bond 8 years ago. The bond currently sells
Question:
Jiminy’s Cricket Farm issued a 30-year, 9 percent semiannual bond 8 years ago. The bond currently sells for 105 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 aftertax cost of debt? Why?
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
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