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Question
TC, Inc. has $15 million of outstanding bonds with a coupon rate of 10 percent. The yield to maturity on these bonds is 12.5 percent. If the firm's tax rate is 30 percent, what is relevant cost of debt financing to TC, Inc.?A) 13.75 percent
B) 8.75 percent
C) 7.00 percent
D) 3.75 percent
Answer
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