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Suppose your firm just issued a 20-year, $1000 par value bond with semiannual coupons. The coupon interest rate is 5%. The bonds sold for par

Suppose your firm just issued a 20-year, $1000 par value bond with semiannual coupons. The coupon interest rate is 5%. The bonds sold for par value, but flotation costs amounted to 9% of the price. You have a 21% corporate tax rate.

What is your firm’s after-tax cost of debt?

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