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8% bonds in Rooney Nose Co are redeemable after 3 more years at 105%. Interest is paid annually, and the next payment is due after one year. The cost of this debt capital to the company is 12% net of tax. Tax payments occur in the same year as the cash flows which give rise to them. Company taxation is at the rate of 35%. What is the equilibrium price per $100 of the bonds? A. $87.25 B. $83.53 C. $61.07 D. $57.37 |