Mudvayne, Inc., is trying to determine its cost of debt. The firm has a debt iss

Question

Mudvayne, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 12 years to maturity that is quoted at 110 percent of face value. The issue makes semiannual payments and has an embedded cost of 10 percent annually. What is the company's pretax cost of debt? (Do not round intermediate calculation and round your answer to 2 decimal places, (e.g., 32.16)) Cost of debt % If the tax rate is 35 percent, what is the after tax cost of debt? (Do not round intermediate calculations and round your answer to 2 decimal places,

Explanation / Answer

PV=-1100

FV=1000

N=24

PMT=50

CLICK CPT AND 1/Y=4.32%*2=8.64%

PRE TAXES COST OF DEBT=8.64%

AFTER TAX COST OF DEBT=8.64%*65%=5.62%

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