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What is the after-tax cost of debt

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Question - Assume the following about Carla corporation: tax rate is 21%, there are 20,000 $1,000 par, 5% coupon semi-annual bonds outstanding (this is the only debt). These bonds are selling at 94% of par and have 10 years to maturity. There are 1,000,000 shares outstanding selling at $40/share. The beta for this stock is 1.2. The risk-free rate is 3%. The expected return on the market is 10%. What is the after-tax cost of debt?

Reference no: EM133053894

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