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Question
Hill Town Motels has $5 million of debt outstanding with a coupon rate of 12%. Currently, the yield to maturity on these bonds is 14%. If the firm's tax rate is 40%, what is the after-tax cost of debt to Hill Town Motels?A) 5.43%
B) 11.2%
C) 8.4%
D) 5.6%
Answer
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