Vipsu Corporation plans to issue 10-year bonds with a par value of $1000

Vipsu Corporation plans to issue 10-year bonds with a par value of $1000 that will pay $55 every six months. The net amount of capital to the firm from the sale of each bond is $840.68. If Vipsu is in the 25% tax bracket and its before-tax cost of capital is 14%, what is the after-tax cost of debt?
a. 7
b. 10.5
c. 11.5
d. 14

 

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