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    Cost of Debt and Preferred Stock

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    Franklin Mining has 15 yr, 8% annual coupon bond outstanding. Bond has a current market price of $885.54 and a face value of $1,000. If Franklin's marginal tax rate is 35% what is its relevant after-tax component cost of debt, rd (1-T)?
    6.15%
    9.46%
    6.76%
    6.40%
    5.60%

    I need to understand the detailed steps on how to approach a problem like this. Please give me detailed instructions. I will try to use excel, but I do not know how the formulas work.

    Please help! Thank you.

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    Solution Summary

    The cost of debt and preferred stock is examined.

    $2.19

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