Busing Manufacturing Has a New Bond Issue That Will Net

question 83

Multiple Choice

Busing Manufacturing has a new bond issue that will net the firm $1,069,000.The bonds have a $1,000,000 par value,pay interest annually at a 12% coupon rate,and mature in 10 years.The firm has a marginal tax rate of 34%.The after-tax cost of the debt issue is:

• A)7.15%.
• B)3.68%.
• C)7.92%.
• D)6.58%.

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Definitions:

Marginal Cost

The increase or decrease in the total cost of a production run for making one additional unit of an item.

Zero Marginal Cost

The situation when producing an additional unit of a good or service does not increase the total cost of production, often associated with digital products or services.

Pushcart

A small cart or wheeled vehicle typically used by vendors for selling goods in public places.

Output

The quantity of goods or services produced in a given period of time by a firm, industry, or country.