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What is the firm after-tax cost of debt financing

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Nine Point Industries is contemplating a new investment to be financed with debt. The firm could sell new $1,000 par value bonds with a 10% coupon rate and semiannual payments. The bonds would mature in 12 years. The bonds would sell at par, but flotation costs would amount to 6% of par value. The firm has a 21% marginal tax rate. What is the firm's after-tax cost of debt financing?

Reference no: EM133003744

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