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What is the after-tax cost of debt for pearce cricket farm

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Reference no: EM132742734

Pearce's Cricket Farm issued a 30-year, 8% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The company's tax rate is 35%. Assume the par value of the bond is $1,000.

Problem a. What is the pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.)

Problem b. What is the after-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.)

Problem c. Which is more relevant, the pre-tax or the after-tax cost of debt?

Reference no: EM132742734

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