Multiple Choice
XYZ Inc. is planning a $200,000 90-day commercial paper issue. The issue is sold for $193,500. There is a flotation cost of $1,500. The corporate tax rate is 35%. (Assume a 365-day year.)
A) The before-tax cost is 15.71%.
B) The before-tax cost is 16.77%.
C) The after-tax cost is 10.21%.
D) The after-tax cost is 10.06%.
Correct Answer:
Verified
Correct Answer:
Verified
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