A company is issuing a 15-year bond with 12 percent coupon rate, $1,000 par value, $970 selling price, $20 flotation cost. If the corporate tax rate is 21 percent, what is the after - tax cost of debt?

A company is issuing a 15-year bond with 12 percent coupon rate, $1,000 par value, $970 selling price, $20 flotation cost. If the corporate tax rate is 21 percent, what is the after - tax cost of debt?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

A company is issuing a 15-year bond with 12 percent
coupon rate, $1,000 par value, $970 selling price, $20
flotation cost. If the corporate tax rate is 21 percent,
what is the after-tax cost of debt?

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