Compute the the cost of debt

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Reference no: EM1360041

J & B Inc. has $5 million of new debt to finance a project with a coupon rate of 12%, paid semiannually and has a par value of $1,000. The bonds will mature in 14 years and are priced at $850, net of flotation costs. If lthe frim's tax rate is 40%, what is the the cost of debt to J & B (Round to the nearest whole percentate.)

a. 9%
b. 11%
c. 13%
d. 15%

Reference no: EM1360041

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