Tangshan Mining Is Considering Issuing Long-Term Debt

question 113

Multiple Choice

Tangshan Mining is considering issuing long-term debt.The debt would have a 30 year maturity and a 6 percent coupon rate and make semiannual coupon payments.In order to sell the issue,the bonds must be underpriced at a discount of 1 percent of face value.In addition,the firm would have to pay flotation costs of 1 percent of face value.The firm's tax rate is 21 percent.Given this information,the after-tax cost of debt for Tangshan Mining would be ________.

• A)4.74%
• B)1.29%
• C)2.43%
• D)4.86%

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