Corporation X has 15-year bonds with a face value of $1,000. These bonds have a current...
Corporation X has 15-year bonds with a face value of $1,000. These bonds have a current market price of $1,200 and an annual rate of 10%. The company has a 35% tax rate. If the company wants to issue new debt, what will be a reasonable estimate for its after-tax cost of debt?
Homework Answers
Tax Rate= 35%
Bond Rate = 10%
After tax Cost of debt = 10*(1-35%)
After tax Cost of debt = 6.5%
Because when the company will pay interest on debt their Tax will reduce
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