Finance for managers, Financial Management

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Before tax cost of debt and after tax cost of debt; Personal finance problem. David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security:
Par value $1000, coupon interest rate 8.0%, corporate tax rate 25%, cost $930, years to maturity 10 years.
a. Calculate the before tax cost of the sony bond using the bond’s yield to maturity (YTM)
b. Calculate the after tax cost of the sony bond given the corporate rate tax


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