Jiminy's Cricket Farm issued a 20-year, 10 percent semiannual bond 2 years ago. The bond currently sells for 93 percent of its face value. The company's tax rate is 35 percent.
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What is the pretax cost of debt? (Do not round intermediate calculation and round your answer to 2 decimal places. (e.g., 32.16))
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| b. |
What is the aftertax cost of debt? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))
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| c. |
Which is more relevant, the pretax or the aftertax cost of debt?
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Aftertax cost of debt |
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Pretax cost of debt |
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