Too Young, Inc., has a bond outstanding with a coupon rate of 7.1 percent and semiannual payments. The bond currently sells for
$1,891 and matures in 17 years. The par value is $2,000. What is the company's pretax cost of debt
1 answer:
Answer:
7.68%
Explanation:
Data provided in the question
Present value = $1,891
Future value or Face value = $2,000
PMT = 2,000 × 7.1% ÷ 2 = $71
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 solving this, The pretax cost of debt is 7.68% (3.84% × 2)
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