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What is the company pretax cost of debt

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Reference no: EM132000376

Tommy Inc. is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 114% of face value. The issue makes semiannual payments and has an embedded cost of 9.8% annually.

a) What is the company's pretax cost of debt?

b) If the tax rate is 35 percent, what is the aftertax cost of debt?

Reference no: EM132000376

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