Bender and Co. is issuing a $1,000 par value bond that pays 9% - 1458

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  • Posted on: Tue 13 Mar, 2012
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Request Description

Bender and Co. is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $918 for the 10-year bond. Bender will have to pay $33 per bond in flotation costs. What is the cost of debt if the firm is in the 34% tax bracket?

            a.   7.23%

          b.   9.01%

          c.   9.23%

          d.   11.95%

Solution Description

Bender and Co. is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $918 for the 10-year bond. Bend