Fashion Wear has bonds outstanding that mature in 11 years, pay interest annually, and have a...
Fashion Wear has bonds outstanding that mature in 11 years, pay interest annually, and have a coupon rate of 6.45 percent. These bonds have a face value of $1,000 and a current market price of $994. What is the company’s pretax cost of debt? What is the company’s aftertax cost of debt if the tax rate is 21 percent?
Pretax cost of debt = yield to maturity = 6.53%
Aftertax cost of debt: 5.16%
Please check the answers and show all work typed out. No excel or grid style please as I am on mobile.
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