Question
Jiminys Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently
| Jiminys Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The companys tax rate is 35 percent. |
| a. | What is the pretax cost of debt? |
| b. | What is the aftertax cost of debt? |
| c. | Which is more relevant, the pretax or the aftertax cost of debt? | ||
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Survey Of Economics, Principles, Applications, And Tools
Authors: Arthur O'Sullivan, Steven M. Sheffrin, Stephen J. Perez
5th Edition
0132556073, 978-0132556071
