You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 15. 50 percent semiannual coupon bonds are selling at a price of $1,117. 25. These bonds are the only debt outstanding for the firm. What is the current YTM of the bonds and after-tax cost of debt for this firm if the bonds are selling at par?

Taxes generally can be defined as a group of value contributions imposed on companies or also individuals by government entities whether national, local, and also regional. Financing government activities, including services and public works such as programs and roads and schools, like Social Security and Medicare are being paid by tax.

Initially, we should calculate the amount of pretax of debt using this formula below:

Pretax cost of debt = Rate(nper, pmt, -pv, fv) x 2

where nper = time of period = 12 years x 2 = 24 years

pmt = percentage of maturity = 15.50 : 2 = 7.75

par value = $1,117. 25

fv = face value = $1,000

Pretax cost of debt = Rate(24, 77.5, -1117.25, 1000) x 2

Pretax cost of debt = 0.0675 x 2

Pretax cost of debt = 0.135 = 13.5%

Pretax cost of debt is equal to YTM

Hence, the current YTM is 13.5%

Thus, we determine the after tax cost of debt using this formula:

After tax cost of debt = Pretax cost of debt x (1 - tax rate)

After tax cost of debt = 0.135 x (1 - 0.34)

After tax cost of debt = 0.0891

After tax cost of debt = 8.91%

So, the after tax cost that should be pay is 8.91%

The question is not complete. There is a missing part. The complete question can be seen in attachment.

Learn more about taxes at https://brainly.com/question/13973001

#SPJ4