You are analyzing the cost of debt for a firm. You know that the firm\'s 14-year

Question

You are analyzing the cost of debt for a firm. You know that the firm's 14-year maturity, 7.8 present coupon bonds are selling at a price of $751.09. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answer the following questions. Your answer has been saved and sent for grading. See Gradebook for score details. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) What is the after-tax cost of debt for this firm if it has a 30 present marginal and average tax rate? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e. 15.25%.)

Explanation / Answer

after tax cost of debt = 11.40%*(1-0.30)=7.98%

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