After-Tax Cost ofBorrowing
DuPont reports ina recent balance sheet $598 million of 5.25 percent notes payable due in 2016.The company’s income tax rate is approximately 19 percent.
a. Compute the company’s after-tax cost of borrowing on this bond issue stated as a total dollar amount.
b. Compute the company’s after-tax cost ofborrowing on this bond issue stated as a percentage,ofthe amount borrowed.
c. Describe briefly the advantage ofraising funds by issuing bonds as opposed to stocks.
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