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ABC Inc. is planning to issue bonds to finance a new project. It offers $1,000 par...

ABC Inc. is planning to issue bonds to finance a new project. It offers $1,000 par

      5-year, 7% semi-annual coupon payment bond. The bond is currently trading at

        $1,150. The firm’s current costs of preferred equity and common equity are 4%

        and 5.5% respectively and marginal tax rate is 34%. The firm’s project cost is

        closest to:

A. 2.43%.

B. 3.98%.

C. 11.93%.

      D. 8.88%

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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