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Author Question: The pre-tax cost of debt for a firm (Read 24 times)

arivle123

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on: Apr 25, 2021

Question 1

The outstanding bonds of The Purple Fiddle are priced at $898 and mature in nine years. These bonds have a 6 percent coupon and pay interest annually. The firm's tax rate is 35 percent. What is the firm's after-tax cost of debt?
◦ 4.94 percent
◦ 5.24 percent
◦ 5.30 percent
◦ 7.18 percent
◦ 7.61 percent

Question 2

The pre-tax cost of debt for a firm
◦ is equal to the yield to maturity on the outstanding bonds of the firm.
◦ is equal to the coupon rate of the outstanding bonds of the firm.
◦ is equivalent to the current yield on the outstanding bonds of the firm.
◦ is based on the yield to maturity that existed when the currently outstanding bonds were originally issued.
◦ has to be estimated as it cannot be directly observed in the market.
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by arivle123 on Apr 25, 2021

kjo;oj

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Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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arivle123

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Reply 2 on: Apr 25, 2021
YES! Correct, THANKS for helping me on my review

bulacsom

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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