The George Company has two issues of debt.Issue A has a maturity value of 8 million dollars,a coupon rate of 8%,paid annually,and is selling at par.Issue B was issued as a 15-year bond 5 years ago.Its coupon rate is 9%,paid annually.Investors demand a pre-tax return of 9.3% on this bond.The maturity value of Issue B is 6 million dollars.The George company has a marginal tax rate of 35%.What is the company is after tax cost of debt?
A) 4.73%
B) 5.56%
C) 7.36%
D) 8.47%
Correct Answer:
Verified
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