Which is more relevant the pretax or aftertax cost of debt

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Reference no: EM131959825

Jiminy's Cricket Farm issued a 30-year, 9.8 percent semiannual bond 5 years ago. The bond currently sells for 87 percent of its face value. The company's tax rate is 40 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 debtPretax cost of debt

Reference no: EM131959825

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