A Firm Has Outstanding Debt with a Coupon Rate of 5

question 90

Multiple Choice

A firm has outstanding debt with a coupon rate of 5%, ten years maturity, and a price of $1,000. What is the after-tax cost of debt if the marginal tax rate of the firm is 35%?

• A) 2.6%
• B) 2.9%
• C) 3.3%
• D) 3.4%

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Definitions:

Privilege

Unearned advantage accorded to members of dominant social groups (males, whites, heterosexuals, the physically able, etc.).

Unearned

Income or benefits received without a direct exchange of goods or services, such as inheritance, gifts, or subsidies.

Genetic Diversity

The total number of genetic characteristics in the genetic makeup of a species, supporting adaptability and survival.

Racial Populations

Groups of people classified or categorized based on physical characteristics, particularly skin color, that are seen as distinct within a society.