Outstanding Debt of Flight Centre (FLT) Trades with a Yield

question 11

Multiple Choice

Outstanding debt of Flight Centre (FLT) trades with a yield to maturity of 6%. The tax rate of FLT is 40%. What is the effective cost of debt of FLT?

• A) 5.3%
• B) 3.6%
• C) 5.7%
• D) 4.5%

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Definitions:

Marginal Cost

Marginal Cost is the cost incurred by producing one additional unit of a product.

Cartel

An association of independent businesses or countries that collaborate to control prices and limit competition within a particular market or industry.

Market Price

The prevailing cost at which one can buy or sell an asset or service.

Marginal Cost

The augmentation in total costs associated with the production of an additional unit of a product or service.