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Problem:

Mountain Retreat and Resort is undergoing a major expansion. The expansion will be financed by issuing a 15-year, $1000 par, 9% annual coupon bonds. The market price of the bonds is $1070 each. The firm's rotation expense on the new bond is $50 per bond. The firm's marginal tax rate is 35%.

Required:

Question: What is the relevant cost of the new bonds for capital budgeting purposes?

A. 5.69%

B. 8.45%

C. 4.82%

D. 5.14%

Note: Please provide reasons to support your answer.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91163000

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