Acc423-LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 8%.

After-Tax Cost of Debt

LL Incorporated’s currently outstanding 11% coupon bonds have a yield to maturity of 8%.

LL believes it could issue at par new bonds that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is LL’s after-tax cost of debt?

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