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What is the pretax cost of debt

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Jiminy's Cricket Farm issued a bond with 20 years to maturity and a semiannual coupon rate of 10 percent 4 years ago. The bond currently sells for 97 percent of its face value. 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?

Reference no: EM131840392

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