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s People Window Help Take a Test- Patrick Quigley Secure I https://www.mathxl.com/Student/PlayerTest.aspx?testid=172973966&centervinay; FINC 300 (01): Fall 2017 Test: Exam 2 Submit Test This Question: 3 pts 28 of 30 (4 complete) his Test 100 pts possi Question Help (Cost of debt) Temple-Midland, Inc. is issuing a $1,000 par value bond that pays 8.6 percent annual interest and matures in 15 years. Investors are willing to pay $954 for the bond and Temple faces a tax rate of 29 percent. What is Temple's after-tax cost of debt on the bond? The after-tax cost of debt is 96. (Round to two decimal places.) Enter your answer in the answer box.

Explanation / Answer

PV = -954

Coupon = 8.6%*1000 = 86

n = 15

FV = 1000

Before tax cost of debt = RATE(15,86,-954,1000) = 9.18%

After tax cost of debt = (1-29%) * 9.18% = 6.52%

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