After-tax cost of debt of the firm, Accounting Basics

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After-tax cost of debt of the firm

Problem:

Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $925, and the company's marginal tax rate is 40%.

Requirement:

Question: What is the after-tax cost of debt of the firm?

Note: Please show basic calculation

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Accounting Basics: After-tax cost of debt of the firm

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Accounting Basics: After-tax cost of debt of the firm

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