Suppose mcdonaldrsquos has a bond issue outstanding that, Financial Management

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Suppose mcdonaldrsquos has a bond issue outstanding that

Suppose McDonald’s has a bond issue outstanding that matures in 25 years. The bond pays interest semi-annually. The bond is currently selling for $908.72 per $1000 bond. McDonald’s average tax rate is 30% and marginal tax rate is 36%. (use annual compounding)

1) What is the cost of debt? (beforetax)

2) What is the cost of debt? (aftertax)

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Financial Management: Suppose mcdonaldrsquos has a bond issue outstanding that

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