Nico Trading Corporation Is Considering Issuing Long-Term Debt

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) none of the above.