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( Cost .ofdebt ) Carraway Seed Company is issuing a $1,000 par value bond that pays 11 percent annual interest and matures in 7years. Investors

(Cost .ofdebt)

Carraway Seed Company is issuing a

$1,000 par value bond that pays 11 percent annual interest and matures in 7years. Investors are willing to pay$985 for the bond. Flotation costs will be 13 percent of market value. The company is in a 30 percent tax bracket. What will be the firm's after-tax cost of debt on the bond?

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