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Bedrick Co. has outstanding 10-year noncallable bonds with a face value of $1,000. These bonds have current market price of $1,278.41, a coupon rate of
Bedrick Co. has outstanding 10-year noncallable bonds with a face value of $1,000. These bonds have current market price of $1,278.41, a coupon rate of 11%, and annual coupon payments. The company faces a tax rate of 30%. If the company wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt?
a. 5.66%
b. 4.92%
c. 3.94%
d. 4.43%
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