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Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello
Edition 17ISBN: 978-0078025778Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello
Edition 17ISBN: 978-0078025778 Exercise 60
After-Tax Cost of Borrowing
DuPont reports in a recent balance sheet $1,383 million of 6.00 percent notes payable due in 2018. The company's income tax rate is approximately 20 percent.
a. Compute the company's after-tax cost of borrowing on this bond issue stated as a total dollar amount.
b. Compute the company's after-tax cost of borrowing on this bond issue stated as a percentage of the amount borrowed.
c. Describe briefly the advantage of raising funds by issuing bonds as opposed to stocks.
DuPont reports in a recent balance sheet $1,383 million of 6.00 percent notes payable due in 2018. The company's income tax rate is approximately 20 percent.
a. Compute the company's after-tax cost of borrowing on this bond issue stated as a total dollar amount.
b. Compute the company's after-tax cost of borrowing on this bond issue stated as a percentage of the amount borrowed.
c. Describe briefly the advantage of raising funds by issuing bonds as opposed to stocks.
Explanation
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(a)
Interest expense paid on bonds woul...
Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello
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