Solutions to Chapter 9 Problems

The Crane Corporation issues $1,500,000 in bonds with a 7.5 percent interest rate. If its marginal tax rate is 35 percent, what is its after-tax cost of the debt? Solution: $73,125. 7.5% (1 - .35) = 4.875% effective after-tax interest rate. $1,500,000 x 4.875% = $73,125 effective annual after-tax interest expense. 18. Financial and Taxable Incomes ................
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