The Corner Bakery Has a Bond Issue Outstanding That Matures

Multiple Choice

The Corner Bakery has a bond issue outstanding that matures in 7 years.The bonds pay interest semi-annually.Currently,the bonds are quoted at 101.4 percent of face value and carry a 9 percent coupon.What is the firm's aftertax cost of debt if the tax rate is 30 percent?

A) 4.88 percent
B) 5.36 percent
C) 5.45 percent
D) 6.11 percent
E) 8.74 percent