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Bizhelp
Bizhelp, CPA
Category: Single Problem
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Experience:  BA degree and Certified Public Accountant
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d. A bond selling to yield 12.2% where the firms tax rate

Resolved Question:

d. A bond selling to yield 12.2% where the firm's tax rate is 34%.

The cost of capital from this bond debt is ___%. (Round to two decimal places.)
Submitted: 5 years ago.
Category: Single Problem
Expert:  Bizhelp replied 5 years ago.
Hi,

Thanks for the question.

wd = kd x (1-tax rate)
= 12.2% x (1-0.34)
= 12.2% x 0.66
= 8.05%

Hope this helps!


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