A firm issues a 10-year debt obligation that bears a 12% coupon rate and gives the investor the right to put the bond back to the issuer at the end of the fifth year at 103% of its face amount. The issue has no sinking funds. Interest is paid semiannually. The issuerÂ’s tax rate is 34%.a. Calculate the after- tax cost of debt, assuming the debt remains outstanding until maturity.b. Calculate the after-tax cost of debt, assuming investors put the bond back to the firm at the end
of the fifth year.
