Alpha Has an Outstanding Bond Issue That Has a 7

question 99

Multiple Choice

Alpha has an outstanding bond issue that has a 7.75% semiannual coupon, a current maturity of 20 years, and sells for $967.97. The firm's income tax rate is 40%. What should Alpha use as an after-tax cost of debt for cost of capital purposes?

• A) 2.42%
• B) 4.04%
• C) 4.85%
• D) 8.08%

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