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Five Rivers Casino is undergoing a major expansion. Issuing new 15-year, $1,000 par, 9% annual coupon bonds, will finance the expansion. The market price of the bonds is $1,070 each. Gamblers floatation expense on the new bonds will be $50 per bond. Gamblers marginal tax rate is 35%. What is the pre-tax cost of the debt for the newly issued bonds?

A. 7.49%

B. 10.25%

C. 8.76%

D. 8.12%

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  • Category:- Basic Finance
  • Reference No.:- M940206

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