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(Cost of debt?) Carraway Seed Company is issuing a ?$1000 par value bond that pays 11...

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Finance

(Cost of debt?) Carraway Seed Company is issuing a ?$1000 parvalue bond that pays 11 percent annual interest and matures in 12years. Investors are willing to pay ?$945 for the bond. Flotationcosts will be 11 percent of market value. The company is in a 20percent tax bracket. What will be the? firm's after-tax cost ofdebt on the? bond?

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3.8 Ratings (453 Votes)
Information providedPar value 1000Time 12 yearsCoupon rate 11Coupon payment 0111000 110Current price present value 945Flotation cost    See Answer
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(Cost of debt?) Carraway Seed Company is issuing a ?$1000 parvalue bond that pays 11 percent annual interest and matures in 12years. Investors are willing to pay ?$945 for the bond. Flotationcosts will be 11 percent of market value. The company is in a 20percent tax bracket. What will be the? firm's after-tax cost ofdebt on the? bond?

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