The outstanding bonds of the purple fiddle are priced at $898 and mature in nine years. these bonds have a 6 percent coupon and pay interest annually. the firm's tax rate is 35 percent. what is the firm's after tax cost of debt?

Answer : 4.34 %

Explanation: The effective interest rate a company pays on its debt obligation is called cost of debt. The cost of debt is denoted by [k]x_{d}[/tex] . As there is a tax shield available on debt interest it is generally calculated by subtracting the marginal tax rate from before tax cost of debt .

.

where,

c= coupon payment = 1000 * 6% = 60

p = current market price = $898

t= marginal tax rate

therefore :-

                    =

                    = 4.34 %

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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