Pearces Cricket Farm issued a 30-year, 9% semiannual bond 4 years ago. The bond currently...
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Accounting
Pearces Cricket Farm issued a 30-year, 9% semiannual bond 4 years ago. The bond currently sells for 94% of its face value. The companys tax rate is 40%. Assume the par value of the bond is $1,000.
a. What is the pre-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.)
b. What is the after-tax cost of debt? (Do not round intermediate calculations. Round the final answer to 3 decimal places.)
c. Which is more relevant, the pre-tax or the after-tax cost of debt?
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