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6 August, 09:01

KatyDid Clothes has a $160 million (face value) 20-year bond issue selling for 101 percent of par that carries a coupon rate of 12 percent, paid semiannually. What would be KatyDid's before-tax component cost of debt? (Round your answer to 2 decimal places.)

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  1. B
    6 August, 10:29
    0
    11.87% pre tax cost of debt

    Explanation:

    Coupon Rate = 12.00%

    Years to Maturity = 20.0

    NPER = 40 (years of maturity x 2)

    PMT = $60.00 (Face value x coupon rate) / 2

    Face Value = $1,000.00

    Price = PV = $1,010.00

    Rate = 5.93%

    rate (nper, pmt,-pv, fv)

    rate (40,60,-1010,1000)

    Yield = Rate x 2 = 11.87% pre tax cost of debt
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