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 5 years ago, Barton Industries issued 25-year noncallable, semiannual bonds with a $1,600 face value and a 8% coupon, semiannual payment ($64 payment every 6 months). The bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? Round your answer to 2 decimal places. 

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Answer #1
1 Face value (FV) $                                        1,600
2 Coupon rate 8.00%
3 Number of compounding periods per year                                                    2
1*2/3 Interest per period (PMT) $                                        64.00
Bond price (PV) $                                   (845.87)
4 Number of years to maturity 20
5 = 4*3 Number of compounding periods till maturity (NPER)                                                  40
Bond yield to maturity RATE(NPER,PMT,PV,FV)*2
Bond yield to maturity 15.84%
(Pre-tax cost of debt)
Bond yield to maturity 9.50%
(After-tax cost of debt) 15.84%*(1-40%)
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