if tiny tots has a outstanding debt currently selling for 800 per bond. it matures in 20 years pays interest annually and has 14% coupon rate par is 1,000, what is the after tax cost of the debt?

To calculate the after-tax cost of debt for Tiny Tots, you need to consider the tax implications of the interest payments. Here's how you can calculate it:

Step 1: Calculate the annual interest payment:
The coupon rate of 14% is applied to the par value of $1,000. Thus, the annual interest payment is 14% * $1,000 = $140.

Step 2: Determine the tax rate:
To calculate the after-tax cost of debt, you need to know the tax rate. Let's assume the tax rate is 30% for this example.

Step 3: Calculate the after-tax annual interest payment:
To calculate the after-tax interest payment, multiply the annual interest payment by (1 - tax rate). In this case, the after-tax interest payment is $140 * (1 - 0.30) = $98.

Step 4: Calculate the after-tax cost of debt:
The after-tax cost of debt is the after-tax interest payment divided by the current market price of the bond. In this case, the after-tax cost of debt is $98 / $800 = 0.1225 or 12.25%.

Therefore, the after-tax cost of debt for Tiny Tots is 12.25%.

To calculate the after-tax cost of debt, we need to consider the tax implications related to the interest payments.

Step 1: Calculate the annual interest payment
The bond has a 14% coupon rate on its par value of $1,000. Therefore, the annual interest payment can be calculated as:
Interest payment = Coupon rate × Par value
= 14% × $1,000
= $140

Step 2: Calculate the after-tax interest payment
To calculate the after-tax interest payment, we need to consider the tax rate. Let's assume a tax rate of 30%.
After-tax interest payment = Interest payment × (1 - Tax rate)
= $140 × (1 - 0.30)
= $140 × 0.70
= $98

Step 3: Calculate the after-tax cost of debt
The after-tax cost of debt can be calculated by dividing the after-tax interest payment by the current market price of the bond.
After-tax cost of debt = After-tax interest payment / Current market price
= $98 / $800
= 0.1225 or 12.25%

Therefore, the after-tax cost of debt for Tiny Tots is 12.25%.