Question
(Cost of debt) The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $1,000 par
(Cost of debt) The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The firm could sell new $1,000 par value bonds at a net price of $930.
The coupon interest rate is 16 percent, and the bonds would mature in 13 years. If the company is in a 40 percent tax bracket, what is the after-tax cost of capital to Zephyr for bonds?
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
