Jiminy's Cricket Farm issued a 30-year, 7.8 percent semiannual bond 5 years ago. The bond...
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Accounting
Jiminy's Cricket Farm issued a 30-year, 7.8 percent semiannual bond 5 years ago. The bond currently sells for 92 percent of its face value. The companys tax rate is 40 percent.
| Required: | |
| (a) | What is the pretax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Pretax cost of debt | % |
| (b) | What is the aftertax cost of debt? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Aftertax cost of debt | % |
| (c) | Which is more relevant, the pretax or the aftertax cost of debt? |
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