Aftertax cost of debt and pretax cost of debt

Assignment Help Financial Management

Reference no: EM131562428

Jiminy's Cricket Farm issued a 30-year, 9.4 percent semiannual bond 9 years ago. The bond currently sells for 88 percent of its face value. The company’s tax rate is 30 percent.

a. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Pretax cost of debt %

b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Aftertax cost of debt %

c. Which is more relevant, the pretax or the aftertax cost of debt?

Aftertax cost of debt Pretax cost of debt

Reference no: EM131562428

Questions Cloud

What the beta of the portfolio : Eminem is a risk taker and would like to invest in the portfolio below. He would like to know what the beta of the portfolio is.

Market risks that cannot be diversified : Two types of risks-Corporate risks that can be diversified and Market risks that cannot be diversified.

Images address the notion of a work and art : How does Banksy’s anonymity as well as his images address the notion of a “work” and “art”?

What must expected return on this stock be : What must the expected return on this stock be?

Aftertax cost of debt and pretax cost of debt : What is the pretax cost of debt? Which is more relevant, the pretax or the aftertax cost of debt? What is the aftertax cost of debt?

An unexpected decrease in corporate tax rates is an example : A group of assets held together by an investor is referred to as a __________. An unexpected decrease in corporate tax rates is an example

Compute shareholder tax rate : Compute shareholder’s tax rate when corporate tax rate is 35% and the dividend tax is 15%.

What is the economic life of this challenger : What is the economic life of this challenger? What is the EUAC corresponding to the economic life in part a?

According to the dividend growth model : According to the dividend growth model, the required rate of return is equal to the capital gains yield if the dividend growth rate is ______.

User Account

All Pages