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Umbrella INC. is trying to determine its cost of debt. The firm has a debt...

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Finance

Umbrella INC. is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 99% of face value. The issue makes semiannual payments and has an embedded cost of 12% annually.

Required:

(a)

What is the company's pretax cost of debt? (Do not round)

A. 11.58% B. 12.80% C. 12.20% D. 12.19% E. 12.67%

(b)

If the tax rate is 36%, what is the aftertax cost of debt? (Do not round)

  1. 8.11% B. 8.19% C.7.80% D. 7.41% E. 6.43%

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