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Problem - Calculating Cost of Debt

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Problem - Calculating Cost of Debt

Jiminy's Cricket Farm issued a 30-year, 6.5 percent semiannual bond 7 years ago. The bond currently sells for 107 percent of its face value. The company's tax rate is 35 percent.

Required -

a. What is the pretax cost of debt?

b. What is the after tax cost of debt?

c. Which is more relevant, the pretax or the after tax cost of debt? Why?

Reference no: EM132456039

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