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Question
Green Valley Motels has $5 million of debt outstanding with a coupon rate of 8.2%. Currently, the yield to maturity on these bonds is 7.3%. If the firm's tax rate is 34%, what is the after-tax cost of debt to Hill Town Motels?
A) 5.33% B) 11.23%% C) 4.75% D) Cannot be determined because the maturity of the bonds is unknown.
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