GLOBAL CORP. HAS BONDS OUTSTANDING. THE BOND'S YIELD TO MATURITY (...

22. Global Corp. has bonds outstanding. The bond's yield to maturity (before-tax cost of the bond) is 12.4 percent and the firm's tax rate is 40 percent. What is the after-tax cost of the bond? A. 12.4%. B. 10.9%. * C. 7.4%. D. 6.2%. E. 4.1%. Solution: use Equation (19-5): cost of bond = .124(1 - .40) = 7.4%