Question

Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. If the corporate tax rate is 32 percent, what is the aftertax cost of Ying's debt?

  

Bond	Coupon Rate	Price Quote	Maturity	Face Value
1	5.8%	107	7 years	$ 18,000,000
2	7.1	116	11 years	38,000,000
3	6.2	111	22 years	48,000,000
4	7.4	122	36 years	62,000,000

Multiple Choice

• 3.9%

• 3.53%

• 3.56%

• 5.46%

• 3.71%

Answer 1