Calculate the after-tax cost of a $25 million debt issue that Pullman Manufacturing Corporation (40% marginal...
Calculate the after-tax cost of a $25 million debt issue that Pullman Manufacturing Corporation (40% marginal tax rate) is planning to place privately with a large insurance company. This long-term issue will yield 9.375% to the insurance company.
Homework Answers
after-tax cost of debt = pretax cost of debt * (1 - tax rate)
Pretax cost of debt = yield on debt issue
after-tax cost of debt = 9.375% * (1 - 40%)
after-tax cost of debt = 5.625%
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Calculate the after-tax cost of a $25 million debt issue that
Pullman Manufacturing Corporation (40% marginal...
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