Suppose a company will offer a new series of bonds that have a coupon of 3%, 20 years to maturity, and according to the Investment Banker, will net the firm $975 per bond with a par value of $1,000. What is the before and after cost of debt for this new issue? Assume a marginal tax of 40%.

a. 3.61% & 2.52% 

b. 3.41% & 2.52% 

c. 3.41% & 2.23% 

d. 3.61% & 2.52%

Answer rating: 100% (QA)

M20years Coupon rate 3 FV 1 000 Bond price 975 Tax ... View the full answer