Logan Holds a 7% Interest-Bearing Debt Instrument in Glow Co

question 8

Multiple Choice

Logan holds a 7% interest-bearing debt instrument in Glow Co.Glow Co.'s tax rate is 27% and Logan is in a 45% tax bracket.Which of the following statements is correct?

• A)The after-tax cost of the debt instrument is 5.11% to Glow Co.and the after-tax value to Logan is 3.85%.
• B)The after-tax cost of the debt instrument is 5.11% to Glow Co.and the after-tax value to Logan is 3.15%.
• C)The after-tax cost of the debt instrument is 1.89% to Glow Co.and the after-tax value to Logan is 3.15%.
• D)The after-tax cost of the debt instrument is 7% to Glow Co.and the after-tax value to Logan is 7%.

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Definitions:

Sodium-Containing

Referring to substances or foods that include sodium, an essential mineral that has various functions in the body but can be harmful in excess.

Isotonic IV Fluid

Isotonic IV fluid is a type of intravenous solution that has the same osmolarity as bodily fluids, commonly used for hydration and replenishment of lost fluids without causing cell shrinkage or swelling.

Pitting Edema

A condition where pressure applied to the skin leaves an indentation, often indicating fluid accumulation in tissues.

Dextrose

A simple sugar that is chemically identical to glucose, used medically as an energy source and in treating hypoglycemia.