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What will the firm true cost of debt be

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Question - Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 36 years, and an annual coupon rate of 11.0%. Flotation costs associated with a new debt issue would equal 8.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 9.0%. The firm's marginal tax rate is 30%. What will the firm's true cost of debt be for this new bond issue?

Reference no: EM133032244

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