The Corner Bakery Has a Bond Issue Outstanding That Matures

question 25

Multiple Choice

The Corner Bakery has a bond issue outstanding that matures in 7 years.The bonds pay interest semi-annually.Currently,the bonds are quoted at 101.4 percent of face value and carry a 9 percent coupon.What is the firm's aftertax cost of debt if the tax rate is 30 percent?

• A)4.88 percent
• B)5.36 percent
• C)5.45 percent
• D)6.11 percent
• E)8.74 percent

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