MTD Inc Has a New Bond Issue That Will Net the the Firm

question 25

Multiple Choice

MTD Inc. has a new bond issue that will net the firm $1,603,500. The bonds have a $1,500,000 par value, pay interest annually at a 6% 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) 5.1%.
• B) 3.37%.
• C) 5.6%.
• D) 6.58%.

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Definitions:

Attitudes

Attitudes are psychological tendencies expressed by evaluating a particular entity with some degree of favor or disfavor.

Experiencing

is the act of going through an event or situation, thereby gaining knowledge or skill from direct participation or observation.

Judging

The cognitive process of forming an opinion or conclusion about something or someone, based on information, observations, or experiences.

Emotional Dissonance

A conflict or inconsistency between experienced emotions and the emotions one expresses in response to societal norms.