A. The (before-tax cost of debt/after-tax cost of debt) is the interest rate that a firm...

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Finance

A. The (before-tax cost of debt/after-tax cost ofdebt) is the interest rate that a firm pays on any newdebt financing.
B. Perpetualcold Refrigeration Company (PRC) can borrow funds atan interest rate of 11.10% for a period of four years. Its marginalfederal-plus-state tax rate is 45%. PRC’s after-tax cost of debt is(6.11%/7.03%/5.80%/6.72%) (rounded to two decimalplaces).
C. At the present time, Perpetualcold Refrigeration Company(PRC) has 10-year noncallable bonds with a face value of $1,000that are outstanding. These bonds have a current market price of$1,278.41 per bond, carry a coupon rate of 11%, and distributeannual coupon payments. The company incurs a federal-plus-state taxrate of 45%. If PRC wants to issue new debt, what would be areasonable estimate for its after-tax cost of debt (rounded to twodecimal places)?
a. 3.87%
b. 3.48%
c. 4.45%
d. 4.64%

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A. The (before-tax cost of debt/after-tax cost ofdebt) is the interest rate that a firm pays on any newdebt financing.B. Perpetualcold Refrigeration Company (PRC) can borrow funds atan interest rate of 11.10% for a period of four years. Its marginalfederal-plus-state tax rate is 45%. PRC’s after-tax cost of debt is(6.11%/7.03%/5.80%/6.72%) (rounded to two decimalplaces).C. At the present time, Perpetualcold Refrigeration Company(PRC) has 10-year noncallable bonds with a face value of $1,000that are outstanding. These bonds have a current market price of$1,278.41 per bond, carry a coupon rate of 11%, and distributeannual coupon payments. The company incurs a federal-plus-state taxrate of 45%. If PRC wants to issue new debt, what would be areasonable estimate for its after-tax cost of debt (rounded to twodecimal places)?a. 3.87%b. 3.48%c. 4.45%d. 4.64%