e-Midland, Inc. is issuing a $1,000 par value bond that pays 7.5 percent annual interest and matures in 15 years. Investors are willing to pay $949 for the bond and Temple faces a tax rate of 32 percent. What is Temple's after-tax cost of debt on the bond?
e-Midland, Inc. is issuing a $1,000 par value bond that pays 7.5 percent annual interest and matures in 15 years. Investors are willing to pay $949 for the bond and Temple faces a tax rate of 32 percent. What is Temple's after-tax cost of debt on the bond?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Temple-Midland, Inc. is issuing a
$1,000
par value bond that pays
7.5
percent annual interest and matures in
15
years. Investors are willing to pay
$949
for the bond and Temple faces a tax rate of
32
percent. What is Temple's after-tax cost of debt on the bond?Question content area bottom
Part 1
The after-tax cost of debt is_____%
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