Question

Beckham corporation has semiannual bonds outstanding with 13 years to maturity and the bonds are currently priced at $746.16. if the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for beckham if its marginal tax rate is 35%? round your intermediate calculation to two decimal places & final percentage answer to three decimal places. 12.890% 6.250% 8.125% 12.500%

Answer 1

First of all find YTM: N= 13*2=26PV= -746.16PMT: 1000*.085= 85/2 = 42.50FV= 1000CPT-- I/Y= 6.25*2 = 12.50
Adjustment of Taxes:12.5/100 = 0.125 x(1-0.35) = 8.125% Ans