Question
A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 9 percent. A new issue would have a
A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 9 percent. A new issue would have a floatation cost of 7 percent of the $1,110 market value. The bonds mature in 12 years. The firm's average tax rate is 30 percent and its marginal tax rate is 26 percent.
What is the firm's after-tax cost of debt on the bond?
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Cornerstones Of Financial Accounting
Authors: Bertrand Piccard, Jay Rich, Jeff Jones, Maryanne Mowen, Don Hansen, Nick Jones
1st Edition
0324657730, 9780324657739
