The pretax or the aftertax cost of debt

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Jiminy's Cricket Farm issued a 30-year, 8.4 percent semiannual bond 9 years ago. The bond currently sells for 90.5 percent of its face value. The company’s tax rate is 30 percent.

Required: (a) What is the pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage 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. Enter your answer as a percentage 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?

Reference no: EM13947869

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