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1a. Your company has one bond outstanding and this bond is actively traded.This bond has a $1,000 par value, 5.5% coupon (paid annually) and 14
1a. Your company has one bond outstanding and this bond is actively traded.This bond has a $1,000 par value, 5.5% coupon (paid annually) and 14 years left to maturity.The bond is currently trading at $971. What is the pretax cost of debt for this company?
b) From the problem above, if the company's marginal tax rate is 26 percent, what is the after-tax cost of existing debt?
2.Ole Corp's preferred stock has a par value of $100 a share and a market price of $125 a share. Annual dividends are $8.80. What is the cost of existing preferred stock?
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