Before-tax cost of debt and after-tax cost of debt

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Reference no: EM13947666

Before-tax cost of debt and after-tax cost of debt: David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security.

Sony Bond

Par value $1,000 Coupon interest rate 6% Corporate tax rate 20%

Cost $ 930 Years to maturity 10

A. Calculate the before-tax cost of the Sony bond.

B. Calculate the after-tax cost of the Sony bond given the corporate tax rate.

Reference no: EM13947666

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