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ABC Co is a manufacturing firm that issued a 5-year bond to finance a project

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ABC Co is a manufacturing firm that issued a 5-year bond to finance a project.

Calculate the before-tax cost of debt and after-tax cost of debt given the following information:

Bond unit = R1000

Duration = 5 years

Discount rate = 3%

Flotation cost = 1%

Coupon rate = 8%

Tax rate = 25%