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    Dublin International Corporation's marginal tax rate is 40%.

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    Dublin International Corporation's marginal tax rate is 40%. It can issue 3-year bonds with a coupon rate of 8.5% and par value of $1,000. The bonds can be sold now at a price of $938.90 each. The underwriters will charge $25 per bond in flotation costs. Determine the appropriate after tax cost of debt for Dublin International to use in capital budgeting analysis.

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    Solution Preview

    The current YTM on the bonds outstanding is 8.5%

    The Marginal Tax Rate is ...

    Solution Summary

    The solution determines the appropriate after tax cost of debt for Dublin International to use in capital budgeting analysis.

    $2.19

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