Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $1,905 and matures 15 years. The par value is $2,000 and the company's tax rate is 21 percent. What is the company's aftertax cost of debt? Multiple Choice О 3.89% О 3.51% о 5.54%

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter11: Determining The Cost Of Capital
Section: Chapter Questions
Problem 9P: Bond Yield and After-Tax Cost of Debt A companys 6% coupon rate, semiannual payment, 1,000 par value...
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Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $1,905 and matures in
15 years. The par value is $2,000 and the company's tax rate is 21 percent. What is the company's aftertax cost of debt?
Multiple Choice
3.89%
3.51%
5.54%
3.27%
4.46%
Transcribed Image Text:Galvatron Metals has a bond outstanding with a coupon rate of 6.5 percent and semiannual payments. The bond currently sells for $1,905 and matures in 15 years. The par value is $2,000 and the company's tax rate is 21 percent. What is the company's aftertax cost of debt? Multiple Choice 3.89% 3.51% 5.54% 3.27% 4.46%
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