Problembender and co is issuing a 1000 par value bond that, Ask an Expert

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Problem:

Bender and Co. is issuing a $1,000 par value bond that pays 9% interest annually. Investors are expected to pay $918 for the 10-year bond. Bender will have to pay $33 per bond in flotation costs.

Required:

Question: What is the cost of debt if the firm is in the 34% tax bracket?

a. 7.23%

b. 9.01%

c. 9.23%

d. 11.95%

Please provide all computations and formulas.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91145907

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