What is the post-tax cost of debt for the newly-issued bonds

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CosaNostra Pizza is undergoing a major expansion. The expansion will be financed by issuing new 30-year, $1,000 par, 9% semiannual coupon bonds. The market price of the bonds is $880 each. Flotation expense on the new bonds will be $90 per bond. The marginal tax rate is 35%. What is the post-tax cost of debt for the newly-issued bonds?

Problem 1: Describe and interpret the assumptions related to the problem.

Problem 2: Apply the appropriate mathematical model to solve the problem.

Problem 3: Calculate the correct solution to the problem. Submit all answers as percentages and round to two decimal places.

Reference no: EM132761426

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