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Posted on Jul 14, 2024

Winthrop has a $20 million debt issue outstanding, with a 8% coupon rate. The debt has annual coupons, and the debt matures in seven years.

Winthrop has a $20 million debt issue outstanding, with a 8% coupon rate. The debt has annual coupons, and the debt matures in seven years. It is currently priced at 93% of par value.

a. What is winthrop pre-tax cost of debt?

b. If Winthrop faces a 35% tax rate, what is its after-tax cost of debt?

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