What is the after-tax cost of the par value bonds

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Question: Brewer's Restaurants expects to sell a new bond issue at its par value. The coupon rate is 8.375 percent, and the coupon is paid annually. Because issuance costs are so small Brewer plans to ignore their impact on the after-tax cost. What is the after-tax cost of these $1000 par value bonds if Brewer's effective tax rate is 40 percent?

A. 10%

B. 3.07%

C. 2.50%

D. 5.03%

Reference no: EM131786685

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