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Great Seneca Inc. sells $100 million worth of 23-year to maturity 6.50% annual coupon bonds. The...

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Finance

Great Seneca Inc. sells $100 million worth of 23-year tomaturity 6.50% annual coupon bonds. The net proceeds (proceedsafter flotation costs) are $985 for each $1,000 bond. The firm'smarginal tax rate is 40%. What is the after-tax cost of capital forthis debt financing?

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Information providedPar value future value 1000Current price present value 985Time 23    See Answer
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Great Seneca Inc. sells $100 million worth of 23-year tomaturity 6.50% annual coupon bonds. The net proceeds (proceedsafter flotation costs) are $985 for each $1,000 bond. The firm'smarginal tax rate is 40%. What is the after-tax cost of capital forthis debt financing?

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