Carraway Seed Company is issuing a

$1,000

par value bond that pays

11

percent annual interest and matures in

6

years. Investors are willing to pay

$955

for the bond. Flotation costs will be

12

percent of market value. The company is in a

38

percent tax bracket. What will be the firm's after-tax cost of debt on the bond?

The firm's after-tax cost of debt on the bond will be

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