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A corporate bond has a face value of $1,000 and a coupon rate of 6. The bond matures in 10 years and has a current market price of $985.

A corporate bond has a face value of $1,000 and a coupon rate of 6.5%. The bond matures in 10 years and has a current market price of $985. If the corporation sells more bonds it will incur flotation costs of $36 per bond. If the corporate tax rate is 34%, what is the after-tax cost of debt capital?
a)  5.71%  
b)  5.45%  
c)  5.18%  
d)  4.78%  
e)  5.89%

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Solution of 538256_FIN.xls

Question:A corporate bond has a face value of $1,000 and a coupon rate of 6.5%. The bond matures in 10 years
and has a current market price of $985. If the corporation sells more bonds it will...

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