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A Firm Has Issued $20 Million in Long-Term Bonds That

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A firm has issued $20 million in long-term bonds that now have 10 years remaining until maturity.The bonds carry an 8% annual coupon but are selling in the market for $877.10.The firm also has $45 million in market value of common stock.For cost of capital purposes, what portion of the firm is debt financed and what is the after-tax cost of debt?


Definitions:

Human Resource Foundation

The basic principles and practices upon which the management of people in an organization is built, including recruitment, selection, training, and development.

Ethical Conduct

Refers to the practice of acting in ways consistent with what society and individuals typically think are good values.

Leadership

The action of leading a group of people or an organization, or the ability to do this.

Ethics Training

Programs designed to educate employees about the principles of moral behavior and decision-making in the workplace.

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