AAPL Inc. is a publicly traded company that has $120 million in bank loan on its books, with a stated interest rate of 4% and $150 million in publicly traded bonds, with a coupon rate of 3.7%. The company currently has a bond rating of BBB, with a default spread of 1.7%. If the current T.Bill rate is 1%, the ten-year T.Bond rate is 3.5% and the marginal tax rate is 35%, what is the pre-tax cost of debt? Select one: а. 2.50% b. 4% с. 3.70% d. 3.50% е. 5.20%
AAPL Inc. is a publicly traded company that has $120 million in bank loan on its books, with a stated interest rate of 4% and $150 million in publicly traded bonds, with a coupon rate of 3.7%. The company currently has a bond rating of BBB, with a default spread of 1.7%. If the current T.Bill rate is 1%, the ten-year T.Bond rate is 3.5% and the marginal tax rate is 35%, what is the pre-tax cost of debt? Select one: а. 2.50% b. 4% с. 3.70% d. 3.50% е. 5.20%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![AAPL Inc. is a publicly traded company that
has $120 million in bank loan on its books,
with a stated interest rate of 4% and $150
million in publicly traded bonds, with a
coupon rate of 3.7%. The company currently
has a bond rating of BBB, with a default
spread of 1.7%. If the current T.Bill rate is 1%,
the ten-year T.Bond rate is 3.5% and the
marginal tax rate is 35%, what is the pre-tax
cost of debt?
Select one:
а. 2.50%
b. 4%
С. 3.70%
d. 3.50%
е. 5.20%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5c0875ac-68ea-4ace-bd0e-dd3042d631fa%2F43d01de3-51f2-43c3-9316-df0482b5c051%2F1ik9mm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:AAPL Inc. is a publicly traded company that
has $120 million in bank loan on its books,
with a stated interest rate of 4% and $150
million in publicly traded bonds, with a
coupon rate of 3.7%. The company currently
has a bond rating of BBB, with a default
spread of 1.7%. If the current T.Bill rate is 1%,
the ten-year T.Bond rate is 3.5% and the
marginal tax rate is 35%, what is the pre-tax
cost of debt?
Select one:
а. 2.50%
b. 4%
С. 3.70%
d. 3.50%
е. 5.20%
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education