Husky Enterprises recently sold an issue of 10-year maturity bonds. The bonds were sold at a deep discount price of $615 each. After flotation costs, Husky received $604.50 each. The bonds have a $1,000 maturity value and pay $50 interest at the end of each year. Compute the after-tax cost of debt for these bonds if Huskys marginal tax rate is 40 percent.© BrainMass Inc. brainmass.com June 3, 2020, 11:22 pm ad1c9bdddf
After tax cost of debt = (Interest expense * ( 1-tax rate) + Issue ...
The solution computes after-tax cost of debt for deep discounts bonds.