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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
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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