(914) The Cost of Debt and Flotation Costs Suppose a company will issue new 20-year debt with...

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(9–14)

The Cost of Debt and Flotation Costs Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The tax rate is 40%. If the flotation cost is 2% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs.

CHALLENGING PROBLEMS 15–17

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Financial Management Theory And Practice

ISBN: 9781439078105

13th Edition

Authors: Eugene F. Brigham, Michael C. Ehrhardt

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