What is the pretax cost of debt

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Reference no: EM131606313

Jiminy's Cricket Farm issued a 30-year, 8 percent semiannual bond 7 years ago. The bond currently sells for 95 percent of its face valued. The company's tax rate is 35 percent.

a. What is the pretax cost of debt?

b. What is the aftertax cost of debt?

c. Which is more relevant, the pretax or the aftertax cost of debt? Why?

Reference no: EM131606313

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