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2 answers:
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Answer:
9.16% and 5.95%
Explanation:
The attachment is shown below:
Given that,
Present value = 108% × $1,000 = $1,080
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 10% ÷ 2 = $50
NPER = 30 years - 7 years × 2 = 46 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this,
1. The pretax cost of debt is 9.16%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 9.16% × ( 1 - 0.35)
= 5.95%
