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Problem 11-9 Approximate yield to maturity and cost of debt [LO11-3] Arborne Airines Inc has...

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Problem 11-9 Approximate yield to maturity and cost of debt [LO11-3] Arborne Airines Inc has a $1,000 par value bond outstanding with 10 years to maturity. The bond carries an annual interest payment of $112 and is currently selling for $860. Airborne is in a 30 percent tax bracket. The firm wishes to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue wili be the same as the yield to maturity on the old issue because the risk and maturity date will be similar. a. Compute the yield to maturity on the old issue and use this as the yleld for the new issue. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) b. Make the appropnate tax adjustment to determine the aftertax cost of debt. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

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