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Compute cost of debt capital before taxes and after taxes

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AT&T will generate $5 million in debt capital by issuing fi ve thousand $1000 8% per year 10-year bonds. If the effective tax rate of the company is 30% and the bonds are discounted 2%, compute the cost of debt capital ( a ) before taxes and ( b ) after taxes from the company perspective. Obtain the answers by hand and spreadsheet.

Reference no: EM13882215

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