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RST Corporation is planning to sell a new 12% bond maturing in 15 years at 95% of its P1,000 par value Flotation cost is P30.

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RST Corporation is planning to sell a new 12% bond maturing in 15 years at 95% of its P1,000 par value Flotation cost is P30. Income tax rate is 32%. How much is the after tax cost of new bond? How much is the net proceeds from the sale of bond? Calculate the before tax cost of the bond issue, assuming a coupon rate of 9.5% (use trial and error at 10%) Calculate the after tax cost of the bond issue. (Relate to the given in the question above)

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