Horseless Carriages Issued Twenty-Year,7 Per Cent Semi-Annual Bonds Eleven Years

question 22

Multiple Choice

Horseless Carriages issued twenty-year,7 per cent semi-annual bonds eleven years ago.The bonds currently sell at 101.3 per cent of face value.What is the firm's after tax cost of debt if the tax rate is 34 per cent?

• A)4.49 per cent
• B)6.71 per cent
• C)4.87 per cent
• D)6.80 per cent
• E)6.83 per cent

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Definitions:

Management By Objectives (MBO)

A management strategy in which employees and managers collaborate to set, monitor, and achieve specific objectives within an organization.

Management By Objectives (MBO)

A strategic management model where goals are defined for each employee and performance is assessed on the basis of achieving these objectives.

Theory X

A management theory assuming that employees are naturally unmotivated and need strict supervision and control to be productive.

Conceptualization

The process of defining clear, distinct ideas or theories.