QUESTION 34

Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). The corporate tax rate for this firm is 39%. The firm's bonds pay interest semiannually with a 6.9% coupon rate and have a maturity of 10 years. If the annual yield to maturity of the bonds is 7.13%, what is the after tax cost of debt for this firm? (Answer to the nearest hundredth of a percent, e.g. 12.34%, but do not use a percent sign).

QUESTION 35

Suppose you are trying to estimate the after tax cost of debt for a firm as part of the calculation of the Weighted Average Cost of Capital (WACC). The corporate tax rate for this firm is 38%. The firm's bonds pay interest semiannually with a 6.9% coupon rate and have a maturity of 13 years. If the current price of the bonds is $933.36, what is the after tax cost of debt for this firm? (Answer to the nearest tenth of a percent, e.g. 12.3%, but do not use a percent sign).