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SClaus & Co

Question 15

Multiple Choice

S.Claus & Co.is planning a zero coupon bond issue that has a par value of $1,000 and matures in 2 years.The bonds will be sold today at a price of $826.45.If the firm's marginal tax rate is 40%,what is the annual after-tax cost of debt to the company on this issue?


A) 5.70%
B) 6.00%
C) 6.30%
D) 6.61%
E) 6.95%

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