10 - 13.17 I need help figuring out part b Problem 13.17 (Part Level Submission)

Question

10 - 13.17 I need help figuring out part b

Problem 13.17 (Part Level Submission) You are analyzing the cost of debt for a firm. You know that the firm's 14-year maturity, 7.0 percent coupon bonds are selling at a price of $653.03. The bonds pay interest semiannually. If these bonds are the only debt outstanding for the firm, answer the following questions. (a) Your answer is correct. What is the current YTM of the bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) Current YTM for the bonds 12.24 | %

Explanation / Answer

After tax cost of debt = YTM*(1-T)= 12.24*(1-.3) = 8.568%

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