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Peyton s Colt Farm issued a 3 0 - year, 7 percent semiannual bond 7 years ago. The bond currently sells for 9 4 percent
Peytons Colt Farm issued a year, percent
semiannual bond years ago. The bond currently sells for percent of its face
value. The companys tax rate is percent.
a What is the pretax cost of debt?
b What is the aftertax cost of debt?
c Which is more relevant, the pretax or the aftertax cost of debt? Why?
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