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4. Lamar Corporation plans to borrow $234,000 for one year at 17 percent from the Jackson State Bank. There is a 25 percent compensating balance
4. Lamar Corporation plans to borrow $234,000 for one year at 17 percent from
the Jackson State Bank. There is a 25 percent compensating balance requirement.
Lamar Corporation keeps minimum transaction balances of $12,000 in the normal course of business. This idle cash counts toward meeting the compensating balance requirement. What is the effective rate of interest? Given a 33% tax rate, what is the after tax cost of debt in this case?
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