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Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 14 years. Investors are willing to
Carraway Seed Company is issuing a
$1,000
par value bond that pays
7
percent annual interest and matures in
14
years. Investors are willing to pay
$990
for the bond. Flotation costs will be
14
percent of market value. The company is in a
20
percent tax bracket. What will be the firm's after-tax cost of debt on the bond?
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