Estimate of the aftertax cost of debt

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Shanken Corp. issued a bond with a maturity of 20 years and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The book value of the debt issue is $40 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value of this issue is $40 million and the bonds sell for 52 percent of par. The company’s tax rate is 40 percent. What is your best estimate of the aftertax cost of debt?

Reference no: EM131072295

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Estimate of the aftertax cost of debt : Shanken Corp. issued a bond with a maturity of 20 years and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 92 percent of its face value. The book value of the debt issue is $40 million. What is your best estimate of t..

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