The approximate after-tax cost of debt for a 20-year, 7 percent, $1,000 par value bond selling at $960 (assume a marginal tax rate of 40 percent) is
A. 4.41 percent.
B. 5.15 percent.
C. 7 percent.
D. 7.35 percent.
Answer:A
The approximate after-tax cost of debt for a 20-year, 7 percent, $1,000 par value bond selling at $960 (assume a marginal tax rate of 40 percent) is
A. 4.41 percent. B. 5.15 percent. C. 7 percent. D. 7.35 percent.