The issue makes annual payments and has an embedded cost, Financial Management

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The issue makes annual payments and has an embedded cost

GIMP Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 2 years to maturity that is quoted at 109.2 percent of face value. The issue makes annual payments and has an embedded cost (coupon rate) of 8.1 percent annually. What is the firm's pretax cost of debt? (Enter answer in percents.)

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Financial Management: The issue makes annual payments and has an embedded cost

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