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The bonds of Casino, Inc. have a 12% coupon rate and yield to maturity of 14.0%. However, investors expect Casino to default for a total

The bonds of Casino, Inc. have a 12% coupon rate and yield to maturity of 14.0%. However, investors expect Casino to default for a total loss with 3.2% probability implying an expected return on debt of 10.8%. What cost of debt should be used in Casino's WACC?

a. 14.0%

b. 10.8%

c. 12.0%

d. 9.1%

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