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Cost of Debt Smith Toolworks issued 2 0 year bonds 8 years ago with a 5 % coupon payment. The bonds are currently selling for

Cost of Debt

Smith Toolworks issued

20

year bonds

8

years ago with a

5 %

coupon payment. The bonds are currently selling for

95 %

of its face value, or $

950 .

What is Smith Toolwork's after

-

tax cost of debt? Assume annual coupon payments and a

40 %

tax rate.

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