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What is the firm after-taxed cost of debt

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Reference no: EM132519810

Smith Stationary Ltd needs to raise $500,000 to improve its manufacturing plant. It has decided to issue a $1,000 face value bond with a 8% annual coupon rate paid semiannually and a 5-year maturity. The investors require 10% rate of return.

Question a. Calculate the price of this bond. How many bonds need to be issued to receive the required amount of fund?

Question b. What is the firm after-taxed cost of debt given the tax rate is 30%?

Reference no: EM132519810

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