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Question
XRT, Inc. is issuing a $1,000 par value bond that pays 8.5% interest annually. Investors are expected to pay $1,100 for the 12-year bond. The firm will pay $50 per bond in flotation costs. What is the after-tax cost of new debt if the firm is in the 35% tax bracket?A) 8.23%
B) 4.55%
C) 4.70%
D) 7.45%
Answer
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