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Jiminy's Cricket Farm issued a 30-year, 8%, semiannual bond 6 years ago. The bond currently sells...

Jiminys Cricket Farm issued a 30-year, 8%, semiannual bond 6 years ago. The bond currently sells for 114% of its face value,

Jiminy's Cricket Farm issued a 30-year, 8%, semiannual bond 6 years ago. The bond currently sells for 114% of its face value, what is the after-tax cost of debt if the company's tax rate is 31%?
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Answer #1

Before tax cost of debt;

Years left to maturity =30-6 =24

=RATE(nper,pmt,pv,fv)

=RATE(24*2,8%/2*1000,-1000*114%,1000)*2

=6.81%

After tax cost of debt =6.81%(1-0.31) =4.70%

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