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What is the pre-tax cost of debt on the newly issued bonds

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Reference no: EM132761445

Problem 1: Reason Corp. just issued a series of 20-year maturity bonds with a par value of $1,000 and a 4% coupon, paid semiannually. The bonds can sell in the open market for $1,125. Flotation costs on the new bonds are $80. If Reason, Corp. is in the 35% tax bracket, what is the pre-tax cost of debt on the newly issued bonds?

Reference no: EM132761445

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