Question: S. Claus & Co. is planning a zero coupon bond issue that has a par value of $1,000 and matures in 2 years. The bonds

S. Claus & Co. is planning a zero coupon bond issue that has a par value of $1,000 and matures in 2 years. The bonds will be sold today at price of $930.00. If the marginal tax rate is 40%, what is the annual after-tax cost of debt to the company on this issue? a. 2.22% b. 2.75% c. 2.73% d. 1.84% e. 2.28%

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