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Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9%, and coupons are paid semiannually.

Suppose we have a bond issue currently outstanding that has 25 years left to maturity. The coupon rate is 9%, and coupons are paid semiannually. The bond is currently selling for $908.72 per $1,000 bond. What is the after-tax cost of debt if the tax rate is 35%?

A. 3.25%

B. 5.00%

C. 6.50%

D. 7.75%

E. 10.00%

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