A firm with a 30% marginal tax rate sells bonds with a $1,000 par value to...

 

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A firm with a 30% marginal tax rate sells bonds with a $1,000 par value to the public for $968. The investment bank assisting with the bond issuance charges a 3% commission on the purchase price of each bond sold. The bonds mature in 10 years and have an annual coupon rate of 5% (paid semi-annually). What is the after-tax cost of debt for the firm issuing the new bonds? a) 4.07% b) 7.72% c) 9.71% d) 8.60% A firm with a 30% marginal tax rate sells bonds with a $1,000 par value to the public for $968. The investment bank assisting with the bond issuance charges a 3% commission on the purchase price of each bond sold. The bonds mature in 10 years and have an annual coupon rate of 5% (paid semi-annually). What is the after-tax cost of debt for the firm issuing the new bonds? a) 4.07% b) 7.72% c) 9.71% d) 8.60%

Answer rating: 100% (QA)

The answer here is Choice D 860 Explanation To arrive at the percentage of ... View the full answer