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SClaus & Company Is Planning a Zero Coupon Bond Issue

question 46

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


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