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Ex. 7 asks for pre-tax cost of debt (i.e., yield to maturity YTM), so you must...

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Ex. 7 asks for pre-tax cost of debt (i.e., yield to maturityYTM), so you must apply =YIELD(...) Excel function previouslylearned from Chapter 7.

Calculate Cost of Debt [LO2] Jiminy’s Cricket Farm issued a30-year, 7 percent semiannual bond 3 years ago. The bond currentlysells for 93 percent of its face value. The company’s tax rate is35 percent. A. What is the pretax cost of debt? B. What is theafter tax cost of debt? C. Which is more relevant, the pretax orthe after tax cost of debt? Why?

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Ex. 7 asks for pre-tax cost of debt (i.e., yield to maturityYTM), so you must apply =YIELD(...) Excel function previouslylearned from Chapter 7.Calculate Cost of Debt [LO2] Jiminy’s Cricket Farm issued a30-year, 7 percent semiannual bond 3 years ago. The bond currentlysells for 93 percent of its face value. The company’s tax rate is35 percent. A. What is the pretax cost of debt? B. What is theafter tax cost of debt? C. Which is more relevant, the pretax orthe after tax cost of debt? Why?

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