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How do you calculate the after tax cost of a debt issue for Pullman Manufacturing Corporation?

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Calculate the after tax cost of a $25 million debt issue that Pullman Manufacturing Corporation (40% marginal tax rate) is planning to place privately with a large insurance company. This long term issue will yield 9 3/8 percent to the insurance company.

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Solution Summary

This solution provides the simple step by step calculations for total after tax cost.