After-tax cost of debt For the following $1,000-par-value bond, assuming annual interest payment and a 21% tax rate, calculate…

Question:

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After-tax cost of debt For the following $1,000-par-value bond, assuming annual interest payment and a 21% tax

rate, calculate the after-tax cost of debt. (Click on the icon here in order to copy the contents of the data table

below into a spreadsheet.)

Life

10 years

Underwriting fee

$20

Discount (-) or

premium (+)

– $30

Coupon

interest rate

11%

The after-tax cost of financing using the approximation formula is%. (Round to two decimal places.)

Expert Answer:

Answer rating: 100% (QA)

To calculate the after tax cost of debt we need to consider the tax shield provided

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