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Wilson's Cabinet has bonds outstanding that mature in eight years, have a 6 percent coupon and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,020. What is the company's pre-tax cost of debt?

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Wilson's Cabinet has bonds outstanding that mature in eight years, have a 6 percent coupon and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,020. What is the company's pre-tax cost of debt?

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Since the bond sells at a Premium (Above Face Value), then we know that the pre-tax cost of debt (Also known as ...

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Manal Elkhoshkhany, MBA
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  • MBA, California State University, Sacramento
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