1. Hyundai Corporation plans to issue 4-year bonds with a par value of $1,000 that will pay $50 every year. The firm will issue these bonds to the buyers at $840 each. (6 points)
a. Compute the before-tax cost of debt. (Hint: Try solving this like you solve for IRR; i.e. try 5%, try 15% etc.
b.b. If Hyundai is in the 25% tax bracket, what is the after-tax cost of debt?
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