The Outstanding Bonds of Tech Express Are Priced at $989

question 74

Multiple Choice

The outstanding bonds of Tech Express are priced at $989 and mature in 10 years.These bonds have a 6 percent coupon and pay interest annually.The firm's tax rate is 35 percent.What is the firm's aftertax cost of debt?

• A)3.01 percent
• B)3.22 percent
• C)3.35 percent
• D)4.00 percent
• E)4.41 percent

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Definitions:

Subscription Agreement

A contract between a company and investors for the purchase of shares in a private placement.

Dilution

The reduction in existing shareholders' ownership percentage of a company due to the issue of new shares.

Shareholders' Value

The value delivered to shareholders because of management's ability to grow earnings, dividends, and share price.

Ownership

The legal right to possess, use, control, and dispose of an asset, property, or a share in a company.