Jack's Boutique has 12,000 bonds outstanding at a quoted price of 98% of face value. The...
Jack's Boutique has 12,000 bonds outstanding at a quoted price of 98% of face value. The bonds mature in 11 years and carry a 9% annual coupon. What is Jack's aftertax cost of long term debt if the marginal tax rate is 21%? Enter percent, round to 2 decimal places.
Homework Answers
using excel rate of function
Yield to maturity =
RATE(number_of_periods, payment_per_period, present_value, [future_value], [end_or_beginning], [rate_guess])
= RATE(11,90,-980,1000)
= 9.30%
after tax cost of debt = YTM * (1- tax rate)
= 9.30% * (1-0.21)
= 7.35%
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