Jennifer Bloom is writing a paper and she must determine which of Porter’s three generic strategies The Museum Company has imple
1 answer:
You might be interested in
Answer:
4.09%
Explanation:
For computing the after cost of debt we have to applied the RATE formula i.e to be shown in the attachment below:
Given that,
Present value = $1,919
Future value or Face value = $2,000
PMT = 2,000 × 6.3% ÷ 2 = $63
NPER = 17 years × 2 = 34 years
The formula is shown below:
= Rate(NPER,PMT,-PV,FV,type)
The present value come in negative
So, after applying the above formula,
1. The pretax cost of debt is 3.35% × 2 = 6.70%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 6.70% × ( 1 - 0.39)
= 4.09%
