### What is its pre-tax and after-tax cost of debt

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1. Fancy, Inc. is considering a five-year project that has initial after-tax outlay or after-tax cost of \$42,000. The future after-tax cash inflows from its project for years 1 through 5 are \$11,000 for each year. Fancy uses the net present value method and has a discount rate of 9.00%. Will Fancy accept the project?

2. A company has 10 year, \$1000 par value bonds issued that pay an annual coupon of \$60 and currently sell for \$866. If the company has a 34% tax rate, what is its pre-tax and after-tax cost of debt?

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