Atlas IncHas a New Bond Issue That Will Net the Firm

question 49

Multiple Choice

Atlas 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:

Emotional Preference

A term indicating an individual's tendency to favor decisions or reactions based on emotions rather than rational analysis.

Robert Zajonc

A psychologist known for his work on the mere-exposure effect and social facilitation, focusing on the interplay between feeling and thinking.

Emotion Precedes Cognition

The theory or observation that emotional responses can occur independently and prior to cognitive processing of a stimulus or situation.

Spillover Effect

refers to the phenomenon where an occurrence in one domain of life affects another, for example, stress from work impacting family life.