Multiple Choice
Nico Trading Corporation is considering issuing long-term debt. The debt would have a 30-year maturity and a 10 percent coupon rate. In order to sell the issue, the bonds must be underpriced at a discount of 5 percent of face value. In addition, the firm would have to pay flotation costs of 5 percent of face value. The firm's tax rate is 35 percent. Given this information, the after-tax cost of debt for Nico Trading would be ________.
A) 7.26%
B) 11.17%
C) 10.00%
D) 9.00%
Correct Answer:
Verified
Correct Answer:
Verified
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