ALL ANSWERS MUST BE IN EXCEL FORMULA FORMAT A B Mudvayne I

******* ALL ANSWERS MUST BE IN EXCEL FORMULA FORMAT *******

A B Mudvayne, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 6 percent annually. What is the company\'s pretax cost of debt? If the tax rate is 35 percent, what is the aftertax cost of debt? 4 Settlement Maturity Price (% of par) Coupon rate Payments per year Tax rate 01/01/00 01/01/18 107 6% 2 35% 6 10 12 13 Complete the following analysis. Do not hard code values in your calculations 15 16 17 18 Pretax cost Aftertax cost of debt

Solution

Pre Tax Cost No of Payments=18*2=36 $107= PV for (100*6/2) for 36 Payments+ 100/(1+i)^36 I= 2.6939% Post Tax 2.6939(1-0.35) 1.75%