Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and a yield to maturity of 5.4%. Simple Corp.'s average tax rate is 18% and its marginal tax rate is 33%. Part 1 What is the (pre-tax) cost of debt? 3+ decimals Submit Part 2 What is the after-tax cost of debt? 4+ decimals

Simple Corp. has one bond issue oustanding, with a maturity of 10.5 years, a coupon rate of 3.6% and a yield to maturity of 5.4%. Simple Corp.'s average tax rate is 18% and its marginal tax rate is 33%. Part 1 What is the (pre-tax) cost of debt? 3+ decimals Submit Part 2 What is the after-tax cost of debt? 4+ decimals

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 12%. The corporate tax rate is 33 %. What would be the approximate after-tax cost of debt for a new issue of bonds? Note: Round your answer to 2 decimal places.
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