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What is the pretax cost of debt

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Reference no: EM131317909

Jiminy's Cricket Farm issued a bond with 25 years to maturity and a semiannual coupon rate of 12 percent 3 years ago. The bond currently sells for 94 percent of its face value. The company's tax rate is 35 percent.

a. What is the pretax cost of debt?

b. What is the 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: EM131317909

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