Question
.An overview of a firm's cost of debt: To calculate the after-tax cost of debt, multiply the before-tax cost of debt by . Omni Consumer
.An overview of a firm's cost of debt:
To calculate the after-tax cost of debt, multiply the before-tax cost of debt by . Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 11.10% for a period of five years. Its marginal federal-plus-state tax rate is 25%. OCPs after-tax cost of debt is:_____ (rounded to two decimal places).
At the present time, Omni Consumer Products Company (OCP) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,278.41 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.)
4.22% 4.74% 5.27% 6.06%
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