In: Finance

**Calculating Cost of Debt**:

WUC Window, Inc., is trying to determine the cost of its debts. The firm has a debt issue outstanding with seven years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has embedded cost of 6.1 annually.

a) What is a WUC"s pretax cost of debt?

b) If the tax rate is 38 percent, what is the after-tax cost of debt?

The cost of debt is important for a company to know, so they can understand their valuation of the company.

a) to find the pre-tax cost of debt

(Total interest cost incurred / Total debt) x 100

= (6.1 +(108-100)) / (208 / 2)

= (6.1 +8) / (104)

= 14.1 / 104

Pretax cost of debt = .135576 or 13.56%

b) to find the after tax cost of debt

= .1356 ( 1- .38)

= .1356 x .62

After tax cost of debt = .084072 or 8.41%

a) The pre-tax cost of debt is 13.56% or .135576.

b) The after tax cost of debt is 8.41% or .084072

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Answer the questions – show all work.
The following relationships and conditions exist for the
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Purchase price is $500 per unit
Carrying costs are 20% of inventory value
Order costs, per order, are $600
Optimal safety stock of 500 units is currently in the company’s
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Use the cost information below for Ruiz Inc. to determine the
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Common stock selling...

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The IRR of this project is enter
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The management of Ethan plc is trying to decide on a
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