Question
I am struggling with the following question A company has outstanding 20-year noncallable bonds with a face value of $1,000, an 11% annual coupon, and
I am struggling with the following question
A company has outstanding 20-year noncallable bonds with a face value of $1,000, an 11% annual coupon, and a market price of $1,294.54. If the company was to issue new debt, what would be a reasonable estimate of the interest rate on that debt? If the company's tax rate is 40%, what is its after-tax cost of debt?
Why isn't the coupon rate a reasonable estimate of the interest rate?
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Corporate Finance A Focused Approach
Authors: Michael C. Ehrhardt, Eugene F. Brigham
8th Edition
0357714636, 9780357714638
