Author Question: Nico Trading Corporation is considering issuing long-term debt. The debt would have a 30-year ... (Read 86 times)

2125004343 · **on:** Jul 11, 2018

Nico Trading Corporation is considering issuing long-term debt. The debt would have a 30-year maturity and a 10 percent coupon rate. In order to sell the issue, the bonds must be underpriced at a discount of 5 percent of face value.

In addition, the firm would have to pay flotation costs of 5 percent of face value. The firm's tax rate is 35 percent. Given this information, the after-tax cost of debt for Nico Trading would be ________.
A) 7.26
B) 11.17
C) 10.00
D) 9.00

Question 2

A call feature in a bond allows bondholders to change each bond into a stated number of shares of common stock.

Indicate whether the statement is true or false