Problem 13-2 Calculating Cost of Debt Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 years to maturity that is quoted at 90 percent of face value. The issue makes semiannual payments and has an embedded cost of 4 percent annually. a. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 21 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Problem 13-2 Calculating Cost of Debt Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 years to maturity that is quoted at 90 percent of face value. The issue makes semiannual payments and has an embedded cost of 4 percent annually. a. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If the tax rate is 21 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 12PROB

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