Calculating the company pre-tax cost of debt, Accounting Basics

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Calculating the company pre-tax cost of debt

Problem:

The Bet-r-Bilt Company has a 5-year bond outstanding with a 3.70 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 90 percent of its face value.

Requirement:

Question: What is the company's pre-tax cost of debt?

Note: Show supporting computations in good form.

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Accounting Basics: Calculating the company pre-tax cost of debt

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Accounting Basics: Calculating the company pre-tax cost of debt

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