CU Window, Inc., is trying to determine its cost of debt. The firm has a debt is
ID: 2759046 • Letter: C
Question
CU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 93 percent of face value. The issue makes semiannual payments and has an embedded cost of 5.6 percent annually. What is ICU’s pretax cost of debt? If the tax rate is 38 percent, what is the aftertax cost of debt? CU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 93 percent of face value. The issue makes semiannual payments and has an embedded cost of 5.6 percent annually. What is ICU’s pretax cost of debt? If the tax rate is 38 percent, what is the aftertax cost of debt? CU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 93 percent of face value. The issue makes semiannual payments and has an embedded cost of 5.6 percent annually. What is ICU’s pretax cost of debt? If the tax rate is 38 percent, what is the aftertax cost of debt?Explanation / Answer
Pretax cost of debt = 5.60%
After tax cost of debt = 5.60% * (1-0.38) = 3.472%