P9–3 Before-tax cost of debt and after-tax cost of debt David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security.

a. Calculate the before-tax cost of the Sony bond.

b. Calculate the after-tax cost of the Sony bond given the corporate tax rate.

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Par value Cost $1,000 $ 930 Sony bond Coupon interest rate 6% Corporate tax rate 20% Years to maturity 10