Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Crandal's flotation expense on the new bonds will be $50 per bond. Crandal's marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds? A. 10.25% B. 8.76% C. 8.12% D. 7.49%
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Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Crandal's flotation expense on the new bonds will be $50 per bond. Crandal's marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?
A. |
10.25% |
|
B. |
8.76% |
|
C. |
8.12% |
|
D. |
7.49% |
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