KatyDid Clothes Has a $150 Million ($1,000 Face Value) 15-Year

Multiple Choice

KatyDid Clothes has a $150 million ($1,000 face value) 15-year bond issue selling for 86 percent of par that carries a coupon rate of 8 percent, paid semiannually. What would be KatyDid's before-tax component cost of debt?

A) 4.90 percent
B) 8.13 percent
C) 9.80 percent
D) 7.09 percent