Cost of Debt: Pre-tax and After-tax Cost of Debt
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Jones, Inc. is trying to determine the cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 6 percent annually. What is the company's pre-tax cost of debt? If the tax rate is 35 percent, what is the after-tax cost of debt?
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Solution Summary
Solution depicts the steps to estimate pre-tax and after-tax cost of debt in the given case.
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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