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Contrail Air, Inc. is trying to determine its cost of debt. The company has an outstanding debt issue with 17 years to maturity that is
Contrail Air, Inc. is trying to determine its cost of debt. The company has an outstanding debt issue with 17 years to maturity that is quoted at 97.00% percent of face value. The issue makes semiannual payments and has a coupon rate of 9.00% percent. What is the after tax cost of debt?
Settlement | 01/01/2000 |
Maturity | 01/01/2017 |
Price (% of par) | 97 |
Coupon rate | 9% |
Payments per year | 2 |
Tax rate | 35% |
Pretax cost | 9.36% |
Answers:
14.39% |
6.08% |
12.63% |
6.93% |
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