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Company A's bond was rated BB+ by S&P. Assume the risk free rate is 2.5% and marginal tax rate is 35% . What is the
Company A's bond was rated BB+ by S&P. Assume the risk free rate is 2.5% and marginal tax rate is 35% . What is the after-tax cost of debt using the following table?
Choose correct answer:
A. 2.73%
B. 5.21%
C. 6.27%
D. 4.08%
Investment Grade Spread 0.46% Junk Bonds Spread BB+ 3.77% AA 0.57% BB 4.32% A+ 0.79% BB- 4.38% 0.86% B+ 4.61% A- 1.17% 5.6% BBB + 1.44% IB- 6.08% BBB 1.90% BBB- 2.38%Step by Step Solution
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