Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%. What is the pre-taxed cost of debt? What is the after tax cost of debt? Which is more relevant, the pre-tax or the after- tax cost of debt? Why?

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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  1. Jones Cricket Institute issued a 30 year, 8 percent semi-annual bond 3 year ago. The bond currently sells for 93 percent of its face value. The Company’s tax rate is 35%.
    1. What is the pre-taxed cost of debt?
    2. What is the after tax cost of debt?
    3. Which is more relevant, the pre-tax or the after- tax cost of debt? Why?
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