Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 24 years to maturity that is quoted at 92 percent of face value. The issue makes semiannual payments and has an embedded cost of 4 percent annually.
a. What is the company’s pretax cost of debt? b. If the tax rate is 23 percent, what is the aftertax cost of debt?

A) 4.51%

B) 3.47%

Explanation:

The pretax cost of debt will be the yield to maturity of the bonds.

YTM = {C + [(F - P)/n]} / [(F + P)/2]

YTM = {20 + [(1000 - 920)/48]} / [(1000 + 920)/2]

YTM = 21.67 / 960 = 2.257% x 2 = 4.51% annual

pretax cost of debt = 4.51%

after tax cost of debt = pretax cost x (1 - tax rate) = 4.51% x (1 - 23%) = 3.47%

muslims control the north africa during the period of 1500 up

to 1800. they made a barrier to prevent further european exploration from

entering the africa from the north. however, the dutch ware still able to move

toward the interior with having south africa as one of the routes leading to

the east for trading with asia.