Illustrate what is the after-tax cost of new debt

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Q. Porky Pine Co. is issuing a $1,000 par value bond which pays 8.5% interest annually. Investors are expected to pay $1,100 for the 12-year bond. Porky will pay $50 per bond in flotation costs. Illustrate what is the after-tax cost of new debt if the organization is in the 35% tax bracket?

Reference no: EM1396580

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