Shanken Corp. issued a 30-year, 6.2 percent semiannual bond 7 years ago. The bond currently sells for 108 percent of its face value. The company's tax rate is 35 percent. A) What is the pretax cost of debt? B) What is the aftertax cost of debt?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Cost of debt

Shanken Corp. issued a 30-year, 6.2 percent
semiannual bond 7 years ago. The bond
currently sells for 108 percent of its face value.
The company's tax rate is 35 percent.
A) What is the pretax cost of debt?
B) What is the aftertax cost of debt?
Transcribed Image Text:Shanken Corp. issued a 30-year, 6.2 percent semiannual bond 7 years ago. The bond currently sells for 108 percent of its face value. The company's tax rate is 35 percent. A) What is the pretax cost of debt? B) What is the aftertax cost of debt?
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