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Suppose you are trying to estimate the after tax cost of debt for a firm as...

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Finance

Suppose you are trying to estimate the after tax cost of debtfor a firm as part of the calculation of the Weighted Average Costof Capital (WACC). The corporate tax rate for this firm is 39%. Thefirm's bonds pay interest semiannually with a 4.8% coupon rate andhave a maturity of 7 years. If the current price of the bonds is$1,143.55, what is the after tax cost of debt for this firm?(Answer to the nearest tenth of a percent, e.g. 12.3%, but do notuse a percent sign).

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3.9 Ratings (715 Votes)
Information provided Par value future value 1000 Current price present value 114355 Time 7 years2 14 semiannual periods Coupon rate    See Answer
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Suppose you are trying to estimate the after tax cost of debtfor a firm as part of the calculation of the Weighted Average Costof Capital (WACC). The corporate tax rate for this firm is 39%. Thefirm's bonds pay interest semiannually with a 4.8% coupon rate andhave a maturity of 7 years. If the current price of the bonds is$1,143.55, what is the after tax cost of debt for this firm?(Answer to the nearest tenth of a percent, e.g. 12.3%, but do notuse a percent sign).

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