Galvatron Metals has a bond outstanding with a coupon rate of 5.9 percent and semiannual payments. The bond currently sells for $1,947 and matures in 21 years.The par value is $2,000 and the company's tax rate is 21 percent. What is the company's aftertax cost of debt?Multiple Choice2.86%3.06%3.89%3.39%4.84%

Answered: Galvatron Metals has a bond outstanding…

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

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Galvatron Metals has a bond outstanding with a coupon rate of 5.9 percent and semiannual payments. The bond currently sells for $1,947 and matures in 21 years. The par value is $2,000 and the company's tax rate is 21 percent. What is the company's aftertax cost of debt?