Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of
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Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 24 years, and an annual coupon rate of 12.0%. Flotation costs associated with a new debt issue would equal 6.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 13.0%. The firm's marginal tax rate is 30%. What will the firm's true cost of debt be for this new bond issue?
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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