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Question: Jiminy’s Cricket Farm issued a 30-


Jiminy’s Cricket Farm issued a 30-year, 4.5 percent semiannual bond three years ago. The bond currently sells for 104 percent of its face value. The company’s tax rate is 22 percent.
a. What is the pretax cost of debt?
b. What is the aftertax cost of debt? c. Which is more relevant, the pretax or the aftertax cost of debt? Why?


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