Jaymes Corporation produces high-performance rotors. It expects to produce 69,000 rotors in the coming year. It has invested $8,
1 answer:
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Answer:
The correct answer is 4.33%(approx)
Explanation:
According to the scenario, the given data are as follows:\
Face value = $1,000
Market price = $1,278.41
Coupon Rate = 11%
So Coupon Payment = $110
Years to maturity = 10 years
So, we can calculate the after tax cost of debt by using following method:
After Tax Cost of Debt = YTM × ( 1 - Rate of Tax)
Where, YTM =
So, by putting the following value, we get
YTM = 0.0721
So by putting the value in formula, we get
After Tax Cost of Debt = 0.0721 × ( 1 - 0.4)
= 4.33% (approx)