The pretax or the aftertax cost of debt

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Jiminy's Cricket Farm issued a 30-year, 8.6 percent semiannual bond 6 years ago. The bond currently sells for 90 percent of its face value. The company’s tax rate is 38 percent.

a. What is the pretax cost of debt ?

b. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Aftertax cost of debt ?

c. Which is more relevant, the pretax or the aftertax cost of debt? pre or after ?

Reference no: EM131536287

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