J & B, Inc. has $5 million of debt outstanding with a coupon rate of 12%. - 4356

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Request Description

J & B, Inc. has $5 million of debt outstanding with a coupon rate of 12%. Currently, the yield to maturity on these bonds is 14%. If the firm’s tax rate is 40%, what is the cost of debt to J & B? 

A. 14.0% 

B. 8.4% 

C. 5.6% 

D. 12.0%

Solution Description

J & B, Inc. has $5 million of debt outs