Find what is the aftertax cost of debt

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Reference no: EM132005232

Question: Mudvayne, Inc., is trying to determine its 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 pretax cost of debt? If the tax rate is 35 percent, what is the aftertax cost of debt?

Settlement 01/01/00

Maturity 01/01/18

Price (% of par) 107

Coupon rate 6%

Payments per year 2

Tax rate 35%

Reference no: EM132005232

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