Dublin International Corporation’s marginal tax rate is 40%. - 3328

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Dublin International Corporation’s marginal tax rate is 40%. It can issue three-year bonds with a coupon rate of 8.5% and par value of $1,000. The bonds can be sold now at a price of $938.90 each. The underwriters will charge $23 per bond in flotation costs. Determine the approximate after-tax cost of debt for Dublin International to use in a capital budgeting analysis.

A.   9.2% B.   5.1% C.   8.5% D.   6.0% 

 
Solution Description

Dublin International Corporation’s marginal tax rate is 40%. It can issue three-year bonds with a coupon rat