Which is more relevant-pretax or after-tax cost of debt

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Reference no: EM132052978

King Fisher Aviation issued a 25 year, 6.8 percent semiannual bond 8 years ago. The bond sells today for 110 percent of its face value. The tax rate is 40%.

1. What is the pretax cost of debt?

2. What is the after-tax cost of debt?

3. Which is more relevant, the pretax or the after-tax cost of debt? Why?

Fill in the values in the spreadsheet.

Reference no: EM132052978

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