Great Lakes Packing has two bond issues outstanding. The first issue has a coupon rate of...

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Finance

Great Lakes Packing has two bond issues outstanding. The firstissue has a coupon rate of 3.68 percent, a par value of $2,000 perbond, matures in 5 years, has a total face value of $4.5 million,and is quoted at 102 percent of face value. The second issue has acoupon rate of 6.45 percent, a par value of $1,000 per bond,matures in 20 years, has a total face value of $8.8 million, and isquoted at 94 percent of face value. Both bonds pay interestsemiannually. The company's tax rate is 40 percent. What is thefirm's weighted average aftertax cost of debt?
rev: 12_13_2018_QC_CS-151241
Multiple Choice
3.40%
3.24%
5.67%
4.53%
3.08%

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Transcribed Image Text

Great Lakes Packing has two bond issues outstanding. The firstissue has a coupon rate of 3.68 percent, a par value of $2,000 perbond, matures in 5 years, has a total face value of $4.5 million,and is quoted at 102 percent of face value. The second issue has acoupon rate of 6.45 percent, a par value of $1,000 per bond,matures in 20 years, has a total face value of $8.8 million, and isquoted at 94 percent of face value. Both bonds pay interestsemiannually. The company's tax rate is 40 percent. What is thefirm's weighted average aftertax cost of debt?rev: 12_13_2018_QC_CS-151241Multiple Choice3.40%3.24%5.67%4.53%3.08%