A firm sold a 10-year bond issue 3 years ago. The bond has a 6.45% annual coupon and a $1,000 face value. If the current market price of the bond is $1,000 (the bond is selling for its face or par value) and the tax rate is 40%, what is the after-tax cost of debt? [Hint: Recall that the after- tax cost of debt = before-tax cost times (1- tax rate).] O 3.87% O 4.19% 4.95% 4.41% 4.78%

A firm sold a 10-year bond issue 3 years ago. The bond has a 6.45% annual coupon and a $1,000 face value. If the current market price of the bond is $1,000 (the bond is selling for its face or par value) and the tax rate is 40%, what is the after-tax cost of debt? [Hint: Recall that the after- tax cost of debt = before-tax cost times (1- tax rate).] O 3.87% O 4.19% 4.95% 4.41% 4.78%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 14P

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