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​(Cost of debt​) Carraway Seed Company is issuing a $1,000 par value bond that pays 11...

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Finance

​(Cost of debt​) Carraway Seed Company is issuing a $1,000 parvalue bond that pays 11 percent annual interest and matures in 11years. Investors are willing to pay ​$965 for the bond. Flotationcosts will be 13 percent of market value. The company is in a 30percent tax bracket. What will be the​ firm's after-tax cost ofdebt on the​bond?

The​ firm's after-tax cost of debt on the bond will be ??

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Solution The firms aftertax cost of debt on the bond will be 975 Working Notes Since the coupon rate is specifically given that annual payment so it will be considered annual coupon    See Answer
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