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Contrail Air, Inc. is trying to determine its cost of debt. The company has an outstanding debt issue with 20 years to maturity that is

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Contrail Air, Inc. is trying to determine its cost of debt. The company has an outstanding debt issue with 20 years to maturity that is quoted at 98.00% percent of face value. The issue makes semiannual payments and has a coupon rate of 10.00% percent. What is the after tax cost of debt? 01/01/2000 Settlement Maturity Price (% of par) Coupon rate Payments per year Tax rate Pretax cost 01/01/2020 98 10% 2 35% 10.24% ? 15.75% ? 7.58% ? 6.65% ? 13.82%

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