J & B, Inc. has $5 million of debt outstanding with a coupon rate of 12%. Currently, - 3880

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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.12.0%

b.14.0%

c.8.4%

d.5.6%

Solution 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