One of these will increase firm aftertax cost of debt

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1. Which one of these will increase a firm's aftertax cost of debt?

a. An increase in the firm's beta.

b. A decrease in the market value of the firm's outstanding bonds.

c. A decrease in the market rate of interest.

d. A decrease in the firm's tax rate.

2. A firm has a bond issue outstanding that matures in four years. The bonds pay interest semiannually. Currently, the bonds are quoted at $1,023 and carry a coupon rate of 9%. What is the firm's after tax cost of debt if the tax rate is 35%?

a. 5.40%

b. 6.88%

c. 5.63%

d. 8.31%

e. 8.66%

Reference no: EM132021536

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