Nico Trading Corporation Is Considering Issuing Long-Term Debt

question 100

Multiple Choice

Nico Trading Corporation is considering issuing long-term debt. The debt would have a 30 year maturity and a 10 percent coupon rate. In order to sell the issue, the bonds must be underpriced at a discount of 5 percent of face value. In addition, the firm would have to pay flotation costs of 5 percent of face value. The firm's tax rate is 35 percent. Given this information, the after tax cost of debt for Nico Trading would be

• A) 7.26%.
• B) 11.17%.
• C) 10.00%.
• D) none of the above.

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Definitions:

Black College Freshmen

African American students who are in their first year of college or university studies.

Rejection Identification Theory

The idea that people can offset the negative consequences of being targeted by discrimination by feeling a strong sense of identification with their stigmatized group.

Discrimination

Unfair or prejudiced treatment of different categories of people or things, especially on the grounds of race, age, or sex.

Negative Stereotypes

Preconceived and oversimplified beliefs about a particular group of people or things that are mostly unfavorable and can lead to discrimination.