Problem:
The Bet-r-Bilt Company has a 5-year bond outstanding with a 3.95 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 95 percent of its face value.
Required:
Question: What is the company's pre-tax cost of debt?
- 4.0 percent
- 8.0 percent
- 5.1 percent
- 2.4 percent
- 9.4 percent
Note: Please provide full description.