Problem
Before-tax cost of debt and after-tax cost of debt Personal Finance Problem David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on the security: Sony Bond Par value $1000; Coupon interest rate 5.5%; Corporate tax rate 20%; Cost $ 920; Years to maturity 10.
Answer the following questions:
a. Calculate the before-tax cost of the Sony bond using the bond's yield to maturity (YTM).
b. Calculate the after-tax cost of the Sony bond given the corporate tax rate.