Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15 -

Question:

Crandal Dockworks is undergoing a major expansion. The expansion will be financed by issuing new 15 - year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. Five Rivers flotation expense on the new bonds will be $50 per bond. Crandals marginal tax rate is 35%. What is the after-tax cost of debt?

A. 5.69%

B. 8.76%

C. 3.06%

D. 8.17%

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...