CORPORATE FINANCE-Lecture-1201 - 5

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CORPORATE FINANCE-Lecture-1201 - 5

chapter 5

Quiz 4

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AAPL Inc. is a publicly traded company that has $120 million in bank loan on its books, with a stated interest rate of 4% and $150 million in publicly traded bonds, with a coupon rate of 3.7%. The company currently has a bond rating of BBB, with a default spread of 1.7%. If the current T.Bill rate is 1%, the ten-year T.Bond rate is 3.5% and the marginal tax rate is 35%, what is the pre-tax cost of debt?

Select one:

a. 3.50%

b. 3.70%

c. 2.50%

d. 4%

e. 5.20%