A company has 8 per cent convertible bonds in issue with a market value of US$95 per US$100 nominal value. The bonds are convertible into 25 ordinary shares per US$100 nominal value in three years' time. The conversion value of the bonds has been correctly estimated at US$109 per US$100 nominal value. The bonds are alternatively redeemable in three years' time at their nominal value. Corporate tax is payable at a rate of 20 per cent. Assuming that the bonds are converted, the NPV of the cash flows has been correctly estimated as US$16.61 positive when discounted at 5 per cent and US$8.67 negative when discounted at 15 per cent. Assuming that the bonds are redeemed at their nominal value the NPV of the cash flows has been correctly estimated at US$8.83 positive when discounted at 5 per cent and US$14.59 negative when discounted at 15 per cent. What is the post-tax cost of the convertible bond? Solution A.11.57 per cent. B.8.77 per cent. C.8.00 per cent. D.6.40 per cent