Company XYZ has issued 65,000 zero-coupon bonds with a face value of $1,000. Those bonds will mature in 6 years and the current market price is $622.14 per bond. Investors use semi-annual compounding for bonds. Marginal corporate income tax rate is 21%, find the annual after-tax effective cost of debt.

Company XYZ has issued 65,000 zero-coupon bonds with a face value of $1,000. Those bonds will mature in 6 years and the current market price is $622.14 per bond. Investors use semi-annual compounding for bonds. Marginal corporate income tax rate is 21%, find the annual after-tax effective cost of debt.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 16P

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