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Scherr Enterprises has a series of 8% coupon bonds outstanding with a $1000 par value. The bonds mature in 10 years and currently sell for
Scherr Enterprises has a series of 8% coupon bonds outstanding with a $1000 par value. The bonds mature in 10 years and currently sell for $946. If new bonds are issued, the issuance cost is expected to be $11 per bond. Scherrs marginal tax rate is 40%. What is the marginal after-tax cost of debt for Scherr? (Assume annual interest payments)
Please show a step-by-step solution with explanations! Also, if you use a financial calculator, let me know what I would input on a BA II Plus Texas Instrument. thank you! :)
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