Question: Axon Industries needs to raise $ 2 5 . 5 8 M for a new investment project. If the firm issues one - year debt,

Axon Industries needs to raise $25.58M for a new investment project. If the firm issues one-year debt, it may haveto pay an interest rate of 9.72%, although Axon's managers believe that 5.20% would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 9.80%. What is the cost to current shareholders of financing the project out of debt?

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