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What is the after tax cost of debt for jones ltd

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Reference no: EM132946102

Problem 1: Jones Ltd borrowed funds at an interest rate of 10%. The debentures were $100 at par issue debentures for 5 years with interest paid annually. Jones Ltd pays tax at the rate of 30%. The current market value of the debentures is $96.00 and will mature in 2 years time at par. The after tax cost of debt is:

Select one:

a. 10.00%
b. 7.00%
c. 8.67%
d. 12.38%

Reference no: EM132946102

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