Business, 14.04.2020 15:52 DeborahMonde

Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 39 years, and an annual coupon rate of 15.0%. Flotation costs associated with a new debt issue would equal 7.0% of the market value of the bonds. Currently, the appropriate discount rate for bonds of firms similar to Costly is 19.0%. The firm's marginal tax rate is 40%. What will the firm's true cost of debt be for this new bond issue?

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Costly Corporation plans a new issue of bonds with a par value of $1000, a maturity of 39 years, and...