Question

10.2 D Question 4 5 pts Several years ago, the Jakobe Company issued a $1,000 par value, non-callable bond that now has 20 years to maturity and a 7% annual coupon that is paid semiannually. The bond currently sells for $965, and the company's tax rate is 40%. What is the component after-tax cost of debt for use in the WACC calculation? Your answer should be between 3.34 and 5.43 rounded to 2 decimal places, with no special characters. Question 5 5 nts

Answer 1

A 1 Bond face value 2 current price 3 years remaining 4 semiannual period 5 coupon rate 6 coupon value 7 yield rate 8 yield rate 9 tax rate 10 after tax rate 1,000.00 965.00 20.00 40.00 0.07 35.00 semiannual 3.67% semiannual 7.34% annual 40.00% 4.40%

Α. Bond face value 1000 2 current price 965 3 years remaining 20 4 semiannual period =+B3*2 5 coupon rate 0.07 6 coupon value =+B1*B5/2 semiannual 7 yield rate =+RATE(B4,-B6,B2,-B1,0) semiannual 8 yield rate =+B7*2 annual 9 tax rate 0.4 10 after tax rate =+B8*(1-19)