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In: Finance

Instructions to solve the problem: You are required to use a financial calculator or spreadsheet (Excel)...

Instructions to solve the problem:

You are required to use a financial calculator or spreadsheet (Excel) to solve the problem related to the cost of capital.

You are required to show the following 3 steps for the problem.

(i) Describe and interpret the assumptions related to the problem.

(ii) Apply the appropriate mathematical model to solve the problem.

(iii) Calculate the correct solution to the problem. Submit all answers as percentages and round to two decimal places.

Problem:

Cosa Nostra Pizza is undergoing a major expansion. The expansion will be financed by issuing new 26-year, $1,000 par, 9% semiannual coupon bonds. The market price of the bonds is $775 each. Flotation expense on the new bonds will be $90 per bond. The marginal tax rate is 35%. What is the post-tax cost of debt for the newly issued bonds?

Thank you,

Solutions

Expert Solution

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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