J & B, Inc. has $5 million of debt outstanding with a coupon rate of - 1456

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  • Posted on: Tue 13 Mar, 2012
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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%.