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:

Absolute Threshold

The minimum intensity of a stimulus that one can detect 50 percent of the time, a concept fundamental in sensory and perception studies.

Difference Threshold

The minimum difference in stimulation that a person can detect 50 percent of the time.

Relative Magnitude

The comparison of the size, extent, or importance of something in relation to another.

Difference Threshold

The least variation in stimulation that an individual is able to recognize 50% of the occasions, commonly termed as the just noticeable difference (JND).