Claus amp firm is planning a zero coupon bond issue. the, Ask an Expert

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problem: S. Claus & firm is planning a zero coupon bond issue. The bond has a par value of $1,000, matures in 2 years, and will be sold at a price of $826.45. The company's marginal tax rate is 40%. Determine the annual after-tax cost of debt to the company on this issue?

[A] 8.0%

[B] 10.0%

[C] 4.0%

[D] 6.0%

[E] 12.0%

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