Question
A. The _________ is the interest rate that a firm pays on any new debt financing. B. Galbraith Co. can borrow at an interest rate
A. The _________ is the interest rate that a firm pays on any new debt financing. B. Galbraith Co. can borrow at an interest rate of 9.7% for a period of four years. Its marginal federal-plus-state tax rate is 35%. What is Galbraith's after-tax cost of debt? C. Calbraith Co. has outstanding 5-year noncallable bonds with a face value of $1000. These bonds have a current market price of $1,050.76, a coupon rate of 10%, and annual coupon payments. The company faces a tax rate of 35%. If the company wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt?
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