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Carla Vista Ltd. has issued bonds that never require the principal amount to be repaid to investors. Correspondingly must make interest payments into the infinite
Carla Vista Ltd. has issued bonds that never require the principal amount to be repaid to investors. Correspondingly must make interest payments into the infinite future. If the bondholders receive annual payments of $87 and current price of the bonds is $1,000. What is the pre tax cost of this debt? 8.7 What is the after tax cost of this debt for Carla Vista if the firm is in the 40% marginal tax rate? Need help with second question.
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