What is epsons pre-tax cost of


Epson has a bond outstanding with a yield to maturity of 5% and a coupon rate of 8%. Epson's beta is 1.4, the risk-free rate is 2.2% and the expected market risk premium is 6%.

Epson has a target debt/equity ratio of 0.6 and a marginal tax rate of 34%.

What is Epson's (pre-tax) cost of debt?

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