Finding the firm after-tax cost of debt

Reference no: EM131962893

Question: (Cost of debt) Gillian Stationery Corporation needs to raise ?$575,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 7.8 percent with interest paid semiannually and a 10-year maturity. Investors require a rate of return of 10.4 percent.

a. Compute the market value of the bonds.

b. How many bonds will the firm have to issue to receive the needed funds?

c. What is the firm's after-tax cost of debt if the firm's tax rate is 34 percent?

Reference no: EM131962893

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