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Compute the after-tax cost of debt for the bonds

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Reference no: EM132957180

Problem 1: Cenage Industries sold a 25 year $1,000 face value bond with a 10 percent coupon rate. Interest is paid annually. After flotation costs, Cenage received $780 per bond. Compute the after-tax cost of debt for these bonds if the firm's marginal tax rate is 40 percent.

Option 1: 13.00%

Option 2: 7.80%

Option 3: 5.20%

Option 4: 11-32%

Reference no: EM132957180

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