Ningbo Shipping, Which Has an Average Tax Rate of 40

Multiple Choice

Ningbo Shipping, which has an average tax rate of 40 percent, would like to estimate the after-tax cost of debt for a 15-year, 12 percent, $1,000 par value bond, selling at $950.Based on this information, the after-tax cost of debt is:

A) 7.7%.
B) 12.0%.
C) 12.8%.
D) 15%.
E) none of the above.