Problem:
Jessica's Boutique has 12,000 bonds outstanding at a quoted price of 98% of face value. The bonds mature in eleven years and carry a 9% annual coupon.
Requirement:
Question: What is Jessica's aftertax cost of debt if the applicable tax rate is 35%?
a. 5.77%
b. 6.33%
c. 6.04%
d. 6.19%
e. 6.23%
Note: Please provide through step by step calculations.