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Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue...

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Finance

Waller, Inc., is trying to determine its cost of debt. The firmhas a debt issue outstanding with 12 years to maturity that isquoted at 109 percent of face value. The issue makes semiannualpayments and has an embedded cost of 7 percent annually.

What is the company's pretax cost of debt?

If the tax rate is 32 percent, what is the aftertax cost ofdebt?

Answer & Explanation Solved by verified expert
3.6 Ratings (332 Votes)
Information provided Face value future value 1000 Current price present value 1091000 1090 Time 12 years2 24 semiannual    See Answer
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Waller, Inc., is trying to determine its cost of debt. The firmhas a debt issue outstanding with 12 years to maturity that isquoted at 109 percent of face value. The issue makes semiannualpayments and has an embedded cost of 7 percent annually.What is the company's pretax cost of debt?If the tax rate is 32 percent, what is the aftertax cost ofdebt?

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