Q17 8.5% bonds sold at OMR 100 less cost of flotation at 5% and cost of underwriting commission charges at 2.5%. If the firm pays tax at a rate of 25%, what is the cost of debt after tax? a. 2.29% b. 5.97% c. 6.89% d. 6.71%

Q17 8.5% bonds sold at OMR 100 less cost of flotation at 5% and cost of underwriting commission charges at 2.5%. If the firm pays tax at a rate of 25%, what is the cost of debt after tax? a. 2.29% b. 5.97% c. 6.89% d. 6.71%

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 87E: Cost of Debt Financing Stinson Corporations cost of debt financing is 6%. Its tax rate is 30%....

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Question

Q17

8.5% bonds sold at OMR 100 less cost of flotation at 5% and cost of underwriting commission charges at 2.5%. If the firm pays tax at a rate of 25%, what is the cost of debt after tax?

2.29%

5.97%

6.89%

6.71%

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