1. The outstanding bonds of panda express are priced at 1100 and mature in 3 years. These bonds have an 8 percent coupon and pay interest annually. The face value is 1000. The firms tax rate is 40 percent. What is the firms after tax cost of debt?
A 2.62 %
B 4.12 %
C 5.35 %
D 7.31 %
E 10.88 %
2. McKesson has a weighted average cost of capital of 12%. The company's cost of equity is 14%, and its pretax cost of debt is 10%. The tax rate is 40%. What is the company's target debt-equity ratio?
A 0.33
B 1.75
C 1.2
D 1.01
E 0.22