The before-tax cost of debt is the interest rate that a firm pays on any new...
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The before-tax cost of debt is the interest rate that a firm pays on any new debt financing. Andalusian Limited (AL) can borrow funds at an interest rate of 12.50% for a period of six years. Its marginal federal-plus-state tax rate is 35%. AL's after-tax cost of debt is (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus- state tax rate of 35%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 5.30% 7.61% 6.62% 5.96% The before-tax cost of debt is the interest rate that a firm pays on any new debt financing. Andalusian Limited (AL) can borrow funds at an interest rate of 12.50% for a period of six years. Its marginal federal-plus-state tax rate is 35%. AL's after-tax cost of debt is (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus- state tax rate of 35%. If AL wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 5.30% 7.61% 6.62% 5.96%
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