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After tax periodic cost of debentures
A company issues 20% Debentures at $100 each for a total of $1500000. The debentures are also traded and currently priced $97,50 per debenture, all these debentures are redeemable in 10 years time at a 5% premium. Interest on the debentures is payable semi-annually in arrears. What is the after tax periodic cost of debentures, interpolating between 6% and 8%? The current taxation rate is 28%.
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