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Question
New Jet Airlines plans to issue 14-year bonds with a par value of $1,000 that will pay $60 every six months. The bonds have a market price of $1,220. Flotation costs on new debt will be 4% of the selling price. If the firm has a 35% marginal tax bracket, compute the following:a. Yield to maturity of debt
b. After-tax cost of existing debt
c. After-tax cost of new debt
Answer
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