Problem:
A firm has outstanding debt with a coupon rate of 9%, ten years maturity, and a price of $1000 per $1000 face value.
Required:
Question: What is that after-tax cost of debt if the marginal tax rate of the firm is 35%.
A. 6.1%
B. 5.3%
C. 5.9%
D. 4.7%
Note: Please provide reasons to support your answer.