J&B, Inc. has $5 million of debt outstanding with a coupon rate of 12%. - 3433

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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 12%. If the firm’s tax rate is 40%, what is the cost of debt to J&B?

a. 14%

b. 12%

c. 8.4%

d. 5.6% 

Solution Description

J&B, Inc. has $5 million of debt outstanding with a cou