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Suspect corp issued a bond with a maturity of 25 years and semi annual coupon rate...

Suspect corp issued a bond with a maturity of 25 years and semi annual coupon rate of 10 percent 4 years ago. The bond currently sells for 97 percent of its face value the company tax rate is 35 percent. What is the pre tax cost of debt ( do not do intermediate calculation run your answer to 2 decimal places) what is the after tax cost of debt (do not do intermediate calculation run your answer to 2 decimal places)

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Answer #1

Hence,

Pretax cost of debt is 10.35% (5.18%*2)

After tax cost of debt 6.73% (10.35%*(1-35%))

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