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The option for the first question is (1-T) (1+T) The option for the second question is 5.48% 6.30% 5.21% 6.03% To calculate the after-tax cost
The option for the first question is
(1-T)
(1+T)
The option for the second question is
5.48%
6.30%
5.21%
6.03%
To calculate the after-tax cost of debt, multiply the before-tax cost of debt by (1 - 1) . Andalusian Limited (AL) can borrow funds at an interest rate of 7.30% for a period of eight years. Its marginal federal-plus-state tax rate is 25%. AL'S after-tax cost of debt is 5.48% (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 20-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,382.73 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plus- state tax rate of 25%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 7.97% 6.64% O 5.31% 5.98%Step by Step Solution
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