Question

You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 15.50 percent semiannual coupon bonds are selling at a price of $1,117.25. These bonds are the only debt outstanding for the firm.

(a1)

Correct answer iconYour answer is correct.

What is the current YTM of the bonds? (Round final answer to 2 decimal places, e.g. 15.25%.)

YTM

enter the current YTM of the bonds in percentages rounded to 2 decimal places

%

eTextbook and Media

  

Attempts: 1 of 3 used

(a2)

Correct answer iconYour answer is correct.

What is the after-tax cost of debt for this firm if it has a marginal tax rate of 34 percent? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

After-tax cost of debt

enter the After-tax cost of debt in percentages rounded to 2 decimal places

%

eTextbook and Media

  

Attempts: 2 of 3 used

(a3)

What is the current YTM of the bonds and after-tax cost of debt for this firm if the bonds are selling at par? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answers to 2 decimal places, e.g. 15.25%.)

YTM		enter percentages rounded to 2 decimal places %
After-tax cost of debt		enter percentages rounded to 2 decimal places %

Answer 1