Business, 14.07.2020 20:01 j015

The is the interest rate that a firm pays on any new debt financing. Blue Hamster Manufacturing (BHM) can borrow funds at an interest rate of 10.20% for a period of eight years. Its marginal federal-plus-state tax rate is 30%. BHM’s after-tax cost of debt is (rounded to two decimal places). At the present time, Blue Hamster Manufacturing (BHM) has a series of ten-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,092.79 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 30%. If BHM wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 5.33% 6.66% 7.99% 7.66%

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The is the interest rate that a firm pays on any new debt financing. Blue Hamster Manufacturing (BHM...

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