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The Zephyr Corporation is contemplating a new investment to be financed 33 percent from debt. The...

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Finance

The Zephyr Corporation is contemplating a new investment to befinanced 33 percent from debt. The firm could sell new $1,000 parvalue bonds at a net price of $930. The coupon interest rate is 9percent and the bonds would mature in 18 years. If the company isin a 38 percent tax bracket, what is the after-tax cost of capitalto Zephyr for bonds?

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4.5 Ratings (700 Votes)
Information provided Par value future value 1000 Present value 930 Coupon rate 9 Coupon payment 0091000 90 Time 18 years    See Answer
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The Zephyr Corporation is contemplating a new investment to befinanced 33 percent from debt. The firm could sell new $1,000 parvalue bonds at a net price of $930. The coupon interest rate is 9percent and the bonds would mature in 18 years. If the company isin a 38 percent tax bracket, what is the after-tax cost of capitalto Zephyr for bonds?

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