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What is the company pre-tax cost of debt

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Problem 1: Management of Stanley Co. is interested to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 97% of face value. The issue makes semiannual payments and has an embedded cost of 5% annually. Assume the par value of the bond is $1,000. What is the company's pre-tax cost of debt??If the tax rate is 35%, what is the after-tax cost of debt?

Reference no: EM132788497

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