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Delton Distribution Company is issuing a $1,000 par value bond that pays 7.0percent annual interest and matures in15 years that is paid semiannually. Investors are

Delton Distribution Company is issuing a $1,000

par value bond that pays 7.0percent annual interest and matures in15

years that is paid semiannually. Investors are willing to pay $958

for the bond. The company is in the 18

percent marginal tax bracket. What is thefirm's after-tax cost of debt on thebond?

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