Calculate the annual after-tax cost (in dollars) of debt

Question: Calculate the annual after-tax cost (in dollars) o…

 

Calculate the annual after-tax cost (in dollars) of debt given the following information:

 

• The firm has 20,000 bonds issued, each with $1,000 par value. (Recall that the coupon interest paid is equal to the par value times the coupon rate.)

 

• The coupon rate paid on the bonds is 5%. (This is the interest expense on the bonds.)

 

• The corporate tax rate is 35%.