A Firm Has a Pre-Tax Cost of Debt of 8

question 77

Multiple Choice

A firm has a pre-tax cost of debt of 8.5%.If the firm has a marginal tax rate of 40%,what is its effective cost of debt?

• A)5.1%
• B)3.4%
• C)8.5%
• D)8.1%
• E)7.2%

---

Definitions:

Learned Helplessness

A psychological state in which an individual learns to believe that they are powerless to change their situation despite the availability of opportunities to do so.

Self-fulfilling Prophecy

When persons behave toward another person according to a label (impression) and cause the person to respond in ways that confirm the label.

Stereotype Threat

The suspicion a member of a group holds that he or she will be judged based on a common stereotype of the group.

Confirmation Bias

The tendency to focus on information relevant to a belief and ignoring or downplaying information that is inconsistent with that belief.