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    Cost of debt question

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    The pretax cost of debt, the aftertax cost of debt, and determining the importance of pretax versus the aftertax cost of debt.

    Here's some background information:

    Previously, I issued a 30 year, 10% semiannual bond about 7 years ago. The bond is selling at 108% of the face value and the tax rate is 35%

    Thank you

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    https://brainmass.com/business/bond-valuation/cost-of-debt-question-216354

    Solution Preview

    The pretax cost of debt, the aftertax cost of debt, and determining the importance of pretax versus the aftertax cost of debt.

    Here's some background information:

    Previously, I issued a 30 year, 10% semiannual bond about 7 years ago. The bond is selling at 108% of the face value and the tax rate is 35%.

    The pretax cost of debt is the yield to maturity of the bond.

    We need to calculate how much the bonds have been issued by using the formula as follows: -

    where B is the issued price
    C is the coupon ...

    Solution Summary

    This solution is comprised of a detailed explanation to determine the importance of pretax versus the aftertax cost of debt.

    $2.19