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What is the after-tax cost of debt capital

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Reference no: EM131732942

A corporate bond has a face value of $1,000 and a coupon rate of 5%. The bond matures in 15 years and has a current market price of $925. If the corporation sells more bonds it will incur flotation costs of $25 per bond. If the corporate tax rate is 35%, what is the after-tax cost of debt capital?

a. 3.74%

b. 5.29%

c. 4.45%

d. 6.78%

Reference no: EM131732942

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