Question
ABC Corp. is undergoing a major expansion. The expansion will be financed by issuing new 12-year, $1,000 par, 9.5% annual coupon bonds. The market price
ABC Corp. is undergoing a major expansion. The expansion will be financed by issuing new 12-year, $1,000 par, 9.5% annual coupon bonds. The market price of the bondsis $1,125 each. Flotation expense on the new bonds will be $50 per bond. The marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
14th edition
1337090581, 978-1337090582
