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13 20 Cost of debt for a firm You are analyzing the after-tax cost of debt for a firm You know that the firms 12 year maturity 95 percent coupon bonds are selling at a price of $1200 If these

13.20 Cost of debt for a firm: You are analyzing the after-tax cost of debt for a firm.You know that the firm’s 12-year maturity, 9.5 percent coupon bonds are selling at a price of $1,200. If these bonds are the only debt outstanding for the firm, what is the after-tax cost of debt for this firm if the marginal tax rate for the firm is 34 percent? What if the bonds are selling at par? Maturity 12 Coupon rate 9.50% Current bond price $1,200 Tax rate 34% Par value $1,000 Coupon frequency 2 After-tax cost of debt (at current price) After-tax cost of debt (if selling at par)
 

May 18 2020 View more View Less

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