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5 July, 01:53

Morgantown tool has 7.5 percent semiannual bonds outstanding that mature in 13 years. the current price quote is $1013 and the tax rate is 35 percent. what is the aftertax cost of debt?

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  1. 5 July, 03:11
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    Semi annual YTM = rate (nper, pmt, pv, fv) in excel = rate (13*2,75/2,-1013,1000) = 3.6715%

    Annual YTM = 3.6715*2 = 7.3431%

    After tax cost of debt = 7.3431 * (1-0.35) = 4.773%
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