FINANCE-Your company has issued bonds that never require the principal amount
QUESTION
Your company has issued bonds that never require the principal amount to be repaid to investors. Correspondingly, the company must make interest payments into the infinite future. If the bondholders receive annual payments of $75 and the current price of the bonds is $882.35, what is the after-tax cost of debt if the firm is in the 40 percent marginal tax rate (in percent)?
ANSWER:
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