Q: 16
CORRECT TEXT
EF has redeemable 10% bonds which are currently trading at $94.00 for each $100 of nominal value.
The bonds can be redeemed at par in five years' time. The corporate income tax rate is 22%.
The present value of the cash flows associated with $100 nominal value of these bonds at a discount
rate of 7% is $9.28.
Calculate the post tax cost of debt.
Give your answer as a percentage to one decimal place.
%
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