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A firm has issued $45 million in long-term bonds that now have 12 years remaining until maturity. The bonds carry an 9% annual coupon and
A firm has issued $45 million in long-term bonds that now have 12 years remaining until maturity. The bonds carry an 9% annual coupon and are selling in the market for $1220.74. The firm also has $50 million in market value of common stock. For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt, if the tax rate is 35%?
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