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Merchandise, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 14 years to maturity that is quoted
Merchandise, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 14 years to maturity that is quoted at 114 % of face value. The issue makes semiannual payments and has a coupon rate of 8 % annually. What is Merchandise s pretax cost of debt? If the tax rate is 35 %, what is the aftertax cost of debt? PART A: Pretax Cost of Debt: ____________ %
PART B: Aftertax Cost of Debt: ____________ %
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