Best estimate of the aftertax cost of debt

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Reference no: EM13921367

Shanken Corp. issued a 25-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 93 percent of its face value. The company’s tax rate is 35 percent.

The book value of the debt issue is $45 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 13 years left to maturity; the book value of this issue is $45 million and the bonds sell for 53 percent of par.

What is your best estimate of the aftertax cost of debt?

Reference no: EM13921367

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