Another company plans to issue 20-year bonds with a face value of $1,000 and an annual coupon rate of 10%. The market price of similar bonds is $1,098. Flotation costs are estimated to be 5% for each bond. If interest payments are made annually, and the company’s marginal tax rate is 34%, what is the after-tax cost of debt?.

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05-10-2022
Business

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Another company plans to issue 20-year bonds with a face value of $1,000 and an annual coupon rate of 10%. The market price of similar bonds is $1,098. Flotation costs are estimated to be 5% for each bond. If interest payments are made annually, and the company’s marginal tax rate is 34%, what is the after-tax cost of debt?.

Sagot :

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