A company issued $20 million in long term bonds at par value 3 years ago with a coupon rate of 10%. The company has decided to issue an additional $20 million in bonds and expects the new issue to be priced at par value with a coupon rate of 8%. There is no other outstanding debt. The applicable tax rate is 35%. What is the appropriate after-tax cost of debt in order to compute the WACC.

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To calculate the aftertax cost of debt in order to compute the Weighted Average Cost of Capital WACC ... View the full answer