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Estimate the before-tax cost of debt for pac ltd

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Reference no: EM133060259

PAC Ltd is planning to issue zero coupon bonds with 20 years to maturity. The face value of the bond would be $800. The company is expected to pay coupons on the bonds at 16% annually and expects a net proceed of $220 from each bond. PAC Ltd currently has 24% tax rate. Using the approximation formula, estimate the before-tax cost of debt for PAC Ltd.

Reference no: EM133060259

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