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Sir
BPP revision kit q212 which is YGV Co (6/10)
Question 1
calculate the after tax cost of debt
Bonds issues at nominal $100, 10 year 110 redeem and 9%
Tax rate 30%
i did 9x.7 so my interest rate figure was 6.3 x 6.418 = 40.43
110 x .422 = 46.42
Total 86.85
cost of debt 6.3/86.85 = 7.25????? Answer in revision kit does some sort of IRR deal but the bonds are just being issued and makes NO mention of any market rate for the bonds whatsoever. Please help me
i got it. Thanks
I am pleased that you have got it 🙂