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KGV Inc. has $ 1 billion in bonds outstanding, with a coupon rate of 4%. The company is rated BBB, with a default spread of

KGV Inc. has $ 1 billion in bonds outstanding, with a coupon rate of 4%. The company is rated BBB, with a default spread of 2% (on top of a risk free rate of 3%). The company has an effective tax rate of 20% and the marginal tax rate is 40%. What is the after-tax cost of debt for the company? Select one: a. 2.4% b. 4.0% O C.3.2% d. 3.0% e. 5.0%

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