Wind Power Systems Has 20-Year,semi-Annual Bonds Outstanding with a 5

question 14

Multiple Choice

Wind Power Systems has 20-year,semi-annual bonds outstanding with a 5 percent coupon.The face amount of each bond is $1,000.These bonds are currently selling for 114 percent of face value.What is the company's pre-tax cost of debt?

• A)3.98 percent
• B)4.42 percent
• C)4.71 percent
• D)5.36 percent
• E)5.55 percent

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Definitions:

Cash Flow from Operating Activities

A measure of the cash generated by a company's normal business operations.

Cash Paid

Money that a company spends during a period for operating activities, investments, and financing activities, excluding non-cash transactions.

Dividends to Stockholders

Payments made to shareholders out of a corporation's profits as a reward for investing in its shares.