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A 5% coupon bond with semi-annual coupon payments and 12 years to maturity has a face value of $1,000 and a market price of $875.

A 5% coupon bond with semi-annual coupon payments and 12 years to maturity has a face value of $1,000 and a market price of $875. If the corporate tax rate is 21%, what is the after-tax cost of debt to this firm?

2.57%

3.26%

5.15%

6.52%

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