Vipsu Corporation plans to issue 10-year bonds with a par value of $1000 that will pay $55 - 3434

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Vipsu Corporation plans to issue 10-year bonds with a par value of $1000 that will pay $55 every six months. The net amount of capital to the firm from the sale of each bond is $840.68. If Vipsu is in the 25% tax bracket and its before-tax cost of capital is 14%, what is the after-tax cost of debt?

a. 7

b. 10.5

c. 11.5

d. 14 

Solution Description

Vipsu Corporation plans to issue 10-year bonds with a par value of $1000 that