Advance, inc., is trying to determine its cost of debt. the firm has a debt issue outstanding with 16 years to maturity that is quoted at 107 percent of face value. the issue makes semiannual payments and has a coupon rate of 10 percent. what is the company's pretax cost of debt?

R= 9.16%

Explanation:

Step 1. Given information.

Step 2. Formulas needed to solve the exercise.

The present value of r is considered taking into account the period of time of the exercise. In this case the period n=32 is because the amount is paid twice in a year, thus, n=16*2

Step 3. Calculation and Step 4. Solution.

Coupon = 10%*1000/2= 50

107%*1000 = 50*(1-1/(1+r/2)^32)/(r/2)+ 1000/(1+r/2)^32

R= 9.16%

88 because 4 plus 4 equals 8. 40 plus 40 equals 80. 80 plus 8 equals 88

answer; comparing the additional benefits and costs;