What is the aftertax cost of debt and pretax cost of debt

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Jiminy's Cricket Farm issued a 30-year, 10.2 percent semiannual bond 8 years ago. The bond currently sells for 86 percent of its face value. The company’s tax rate is 34 percent.

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

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?

(Click to select) Pretax cost of debtAftertax cost of debt

Reference no: EM132038039

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