The after-tax cost of debt

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Chapter 11, Problem 2P

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To calculate: The after-tax cost of debt

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After-Tax Cost of Debt LL Incorporated's currently outstanding 10% coupon bonds have a yield to maturity of 7.8%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is LL's after-tax cost of debt? Round your answer to two decimal places. %

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