Determine the appropriate after-tax cost of debt

Reference no: EM133249329

Question 1 - The firm's business risk is influenced by:

a. the level of stability in the firm's revenue stream and operating costs

b. the firm's level of debt

c. the operating cost strucute of the firm

d. a and c

Question 2 - Lux Ltd issued 10-year bonds with a coupon rate of 5% and a face value of $1,000. The coupon interest is paid semi-annually. The bonds are expected to mature in 5-years. The bonds are trading currently at a price of $965 each. Determine the appropriate after-tax cost of debt for Lux Ltd. Assume a 30% tax rate.

a. 4.67%

b. 2.07%

c. 5.97%

d. 6.26%

Reference no: EM133249329

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