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The firm can raise an unlimited amount of debt by selling R1,000 par value, 8% coupon interest rate, and 20-year bonds on which annual interest

  1. The firm can raise an unlimited amount of debt by selling R1,000 par value, 8% coupon interest rate, and 20-year bonds on which annual interest payments will be made. To sell the issue, an average discount of R50 per bond would have to be given. The firm also must pay flotation costs of R50 per bond. The firm is in the 40% tax bracket. Determine the after-tax cost of debt. 

  2. A. 5.86% 

  3. B. 5.48% 

  4. C. 5.46% 

  5. D. 5.55%.

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