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A Firm Can Issue $1,000 Par Value Bond That Pays

Question 35
Multiple Choice

A firm can issue $1,000 par value bond that pays $100 per year in interest at a price of $980. The bond will have a 5-year life. The firm is in a 35% tax bracket. What is the after tax cost of debt? A) 10.53% B) 10.20% C) 6.85% D) 6.50%

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