The Outstanding Debt of Berstin Corp

question 5

Multiple Choice

The outstanding debt of Berstin Corp. has eight years to maturity, a current yield of 7%, and a price of $85. What is the pretax cost of debt if the tax rate is 40%?

• A) 5.1%
• B) 5.9%
• C) 8.5%
• D) more information needed

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Definitions:

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