Problem:
Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are currently priced at $746.16.
Requirement:
Question: If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street.
- 6.250%
- 12.890%
- 12.500%
- 8.125%
Note: Show all workings.