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To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Andalusian Limited (AL) can borrow funds at an interest rate of
To calculate the after-tax cost of debt, multiply the before-tax cost of debt by Andalusian Limited (AL) can borrow funds at an interest rate of 9.70% for a period of eight years. its marginal federal-plus-state tax rate is 25%. AL's after-tax cost of debt is (rounded to two decimal places). At the present time, Andalusian Limited (AL) has 20 -year noncaliable bonds with a face value of $1,000 that are outatanding. These bonds have a current market price of $1,181.96 per bond, carry a coupon rate of 13%, and distribute annual coupon payments. The company incurs a federal-plusstate tax rate of 25%. If M wants to issue new debt, what would be a reasonable estimate for its afteri tax cost of debt (rounded to two decimal plinces)? (Notei Round your YTM rate to Iwo decamal plicce.) 9.67% 8.0604 9.2754 7.25%
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