Wang Corp has been told by its investment bankers that it would have - 14590

Solution Posted by
yousafbhutta

yousafbhutta

Rating : (28)C
Solution Detail
Price: $1.00
  • From: Business,
  • Posted on: Sat 27 Oct, 2012
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

 

Wang Corp has been told by its investment bankers that it would have to pay 8% interest to successfully sell new bonds. The company has bonds outstanding, issued 5 years ago, on which the company is paying 12% annual interest. The company’s tax rate is 40%. What is its after-tax cost of debt if it decides to borrow new funds?
Answer
a. 8%
b. 12%
c. 4.8%
d. 3.2%

Solution Description

 

Wang Corp has been told by its investment