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A firm has a bond with 22 years to maturity, and pays an annual coupon payment of 10%. The bond is currently selling for $1,147.15.
A firm has a bond with 22 years to maturity, and pays an annual coupon payment of 10%. The bond is currently selling for $1,147.15. When the company issues a new bond, there will be administrative costs and flotation costs estimated at $25 per bond. If the firm decides to issue new 20-year bonds today, what would be the effective cost of the new bonds, assuming a 35% marginal tax rate?
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