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Laurel, Inc., has debt outstanding with a coupon rate of 5.9% and a yield to maturity of 6.9%. Its tax rate is 35%. What is

Laurel, Inc., has debt outstanding with a coupon rate of 5.9% and a yield to maturity of 6.9%. Its tax rate is 35%.

What is Laurel's effective (after-tax) cost of debt?

NOTE: Assume that the debt has annual coupons and that the firm will always be able to utilize its full interest tax shield.

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