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What is the pretax cost of debt

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Reference no: EM132384782

Suspect Corp. issued a bond with a maturity of 16 years and a semiannual coupon rate of 6 percent 2 years ago. The bond currently sells for 91 percent of its face value. The company's tax rate is 35 percent.

a. What is the pretax cost of debt? (Do not round intermediate calculations. 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. 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?

  • Aftertax cost of debt
  • Pretax cost of debt

Reference no: EM132384782

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