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A company's target capital structure is 2 5 percent debt and 7 5 percent common equity. Its bonds have a 6 percent coupon, paid annually,

A company's target capital structure is 25 percent debt and 75 percent common equity. Its
bonds have a 6 percent coupon, paid annually, a current maturity of 10 years, and sell for
$1,000. The firm's marginal tax rate is 21 percent. Which of the following is Rollins' after tax
cost of debt?
1.50%
6.00%
4.74%
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