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Question
Mountain Retreat and Resort is undergoing a major expansion. The expansion will be financed by issuing new 15-year, $1,000 par, 9% annual coupon bonds. The market price of the bonds is $1,070 each. The firm's flotation expense on the new bonds will be $50 per bond. The firm's marginal tax rate is 35%. What is the relevant cost of the new bonds for capital budgeting purposes?A) 5.14%
B) 5.69%
C) 8.45%
D) 4.82%
Answer
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