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03-01-2023
Business

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Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 106 percent of face value. The issue makes semiannual payments and has an embedded cost (i.e. a coupon rate as an APR) of 12 percent annually. Required:(a) What is the company's pre-tax cost of debt as an APR? (b) If the tax rate is 33 percent, what is the after-tax cost of debt as an APR?

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