Dog Gone Good Engines Has a Bond Issue Outstanding with 17

question 6

Multiple Choice

Dog Gone Good Engines has a bond issue outstanding with 17 years to maturity.These bonds have a $1,000 face value,a 9 percent coupon,and pay interest semi-annually.The bonds are currently quoted at 82 percent of face value.What is the company's pre-tax cost of debt if the tax rate is 38 percent?

• A)4.10 percent
• B)4.42 percent
• C)6.61 percent
• D)8.90 percent
• E)11.42 percent

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