A Firm Has a Pre-Tax Cost of Debt of 9

question 30

Multiple Choice

A firm has a pre-tax cost of debt of 9.0%. If the firm has a marginal tax rate of 35%, what is its effective cost of debt?

• A) 5.9%
• B) 4.1%
• C) 9.4%
• D) 9.1%

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Definitions:

Insider Trade

The buying or selling of a company's securities by someone with access to confidential or non-public information about the company.

Dramatic Departure

A term that signifies a significant shift or change from the usual, expected, or traditional course, often implying dramatic or consequential actions.

Insiders

Individuals within an organization who have access to confidential and proprietary information not available to the public, such as executives and key employees.

Reporting Issuer

A corporation that has issued securities to the public and is obligated to disclose periodic financial information to regulatory agencies and shareholders.