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Financing the project out of debt

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Axon Industries needs to raise $23.64M for a new investment project. If the firm issues one-year debt, it may haveto pay an interest rate of 8.94 %, although Axon's managers believe that 4.38 % would be a fair rate given the level of risk. If the firm issues equity, they believe the equity may be underpriced by 10.45 %. What is the cost to current shareholders of financing the project out of debt?

Reference no: EM132673366

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