BUS 401 Arizona University Coupon Rate of Interest Business Discussion

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Suppose a five year sh. 100 debenture of a firm can be sold at a net price of sh. 95.90. The coupon rate of interest is 14% per annum and the debentures will be redeemed at 5% premium at maturity. Compute the cost of debt. Assume the tax rate is 50%, compute the after tax cost of debt