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What is the pretax cost of debt

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A company issued a 25 year, 6.8 percent semiannual bond 8 years ago. The bond sells today for 110 percent of its face value. The tax rate is 40%.

  1. What is the pretax cost of debt?
  2. What is the after-tax cost of debt?
  3. Which is more relevant, the pretax or the after-tax cost of debt? Why?

Reference no: EM131975578

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