Galvatron Metals has a bond outstanding with a coupon rate of 6.3 percent and semiannual payments. The bond currently sells for $1,919 and matures in 17 years. The par value is $2,000 and the company's tax rate is 39 percent. What is the company's aftertax cost of debt?

4.09%

Explanation:

For computing the after cost of debt we have to applied the RATE formula i.e to be shown in the attachment below:

Given that,  

Present value = $1,919

Future value or Face value = $2,000  

PMT = 2,000 × 6.3% ÷ 2 = $63

NPER = 17 years × 2 = 34 years

The formula is shown below:  

= Rate(NPER,PMT,-PV,FV,type)  

The present value come in negative  

So, after applying the above formula,

1. The pretax cost of debt is 3.35% × 2 = 6.70%

2. And, the after tax cost of debt would be

= Pretax cost of debt × ( 1 - tax rate)

= 6.70% × ( 1 - 0.39)

= 4.09%

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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