After tax cost of debt problem

Business & Finance
Tutor: None Selected Time limit: 1 Day

Great Seneca Inc. sells $100 million worth of 25-year to maturity 13.76% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $992 for each $1,000 bond. The firm's marginal tax rate is 30%. What is the after-tax cost of capital for this debt financing?

Round the answer to two decimal places in percentage form.

Sep 28th, 2015

Thank you for the opportunity to help you with your question!

first find cost of debt: rate(25, 137.6, -992, 1000) = 13.88%

after tax cost = 13.88%( 1- 30%) =13.88%*70% = 9.71%

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Sep 28th, 2015

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