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Carraway Seed Company is issuing a $1,000 par value bond that pays 6 percent annual interest and matures in 5 years. Inv...

Carraway Seed Company is issuing a $1,000 par value bond that pays 6 percent annual interest and matures in 5 years. Investors are willing to pay $955 for the bond. Flotation costs will be 14 percent of market value. The company is in a 40 percent tax bracket. What will be the​ firm's after-tax cost of debt on the​ bond?

The​ firm's after-tax cost of debt on the bond will be....%?

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Answer #1

COUPON RATE 6.00% NPER = YEARS TO MATURITY PMT = $60.00 (face value x coupon rate) FACE VALUE $1,000.00 PRICE = PV = $821.30

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