What is firm pre-tax cost of debt

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Catnip Stores has a $20 million bond issue outstanding that currently has a market value of $19 million. The bonds pay semiannual coupons, have a coupon rate of 8.9% and a yield to maturity of 11.95%. The tax rate is 31.2%. What is the firm's pre-tax cost of debt? Input your answer as a decimal rounded to four decimal places. NOTE: The pre tax cost of debit is the yield to maturity on outstanding bonds.

Reference no: EM132038845

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