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The firm can raise an unlimited amount of debt by selling 51000, 10 percent, 10-year bonds on which annual interest payments will be made. To

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The firm can raise an unlimited amount of debt by selling 51000, 10 percent, 10-year bonds on which annual interest payments will be made. To sell the issue, an average discount of $30 per bond would have to be given. The firm must also pay flotation costs of 20 per bond. The firm is in 40% marginal tax bracket. What is the cost of debt? Warren Industries can sell 15-year, $1,000 par value bonds paying annual interests with a 12 percent coupon. As a result of current interest rates, the bonds can be sold for $1,010 each flotation costs of $30 per bond will be incurred in this process. The firm is in 40% marginal tax bracket

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