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Calculate the ?before-tax cost of financing

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Gronseth Drywall? Systems, Inc., is in discussions with its investment bankers regarding the issuance of new bonds. The investment banker has informed the firm that different maturities will carry different coupon rates and sell at different prices. The firm must choose among several alternatives. In each? case, the bonds will have a ?$1,000 par value and flotation costs will be ?$40 per bond. Calculate the ?before-tax cost of financing with the following alternative.

Coupon rate 5%

Time to maturity 12 years

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Reference no: EM132694682

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