Question: Firm A plans to issue a $ 1 , 0 0 0 par value, 2 0 - year noncallable bond with a 7 . 0

Firm A plans to issue a $1,000 par value, 20-year noncallable bond with a 7.00% annual coupon, paid semiannually. The firm is considering a change in the corporate tax rate to 30.00%. By how much would the after-tax cost of debt (i.e., r_d \times (1-T)) using the new tax rate decrease?1.0.77%2.0.85%3.0.70%4.0.63%5.0.57%

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