Question
Jiminys Cricket Farm issued a bond with 16 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently
Jiminys Cricket Farm issued a bond with 16 years to maturity and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 91 percent of its face value. The companys tax rate is 35 percent. a. What is the pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Pretax cost of debt 8.42 % b. What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt 4.51 %
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