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Contrail Air, Inc. is trying to determine its cost of debt. The company has an outstanding debt issue with 18 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 18 years to maturity that is quoted at 97.00% percent of face value. The issue makes semiannual payments and has a coupon rate of 8.00% percent, what is the pretax cost of debt? Settlement Maturity Price (% of par) Coupon rate Payments per year Tax rate 01/01/2000 01/01/2018 97 8% 2 36% ? 16.53% o 4.24% ? 9.35% o 8.25%

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